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US Industrial Activity  Continues to Fall
World Economy

US Industrial Activity Continues to Fall

Industrial production in the US continues to slow. In March, the industrial production figure came in at an annual pace of 2.0%, down from the previous month’s reading of 3.5%, while also falling below estimates for 3%.
Since July, industrial production has nearly halved from 5%, to current levels. Analysts see the decline in factory activity as signaling a potential slowdown in first quarter economic growth, Seeking Alpha reported.
“This provides some confirmation on the disappointing growth performance in the first quarter. The absence of a lift in the other forward-looking indicators suggests that the US economic recovery is struggling to regain any traction,” Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters.
Moreover, a separate measure of manufacturing activity also showed weakness. In April, the Philadelphia Fed Manufacturing Index came in at 7.5, up from the previous month’s reading of 5.0, while also exceeding estimates for 6.3.
Since peaking at a reading of nearly 40 in the fall, the index has trended lower, seen below. Within the Fed survey, companies cited as strong dollar as weighing on foreign sales, and overall activity.
“The Philadelphia Fed, as part of its monthly survey of manufacturing executives, asked special questions about the dollar. The Dollar Index is up about 20% over the last year. A key finding was that the dollar has had a relatively large negative impact on foreign sales, and prices received, but only partly offset by lower costs for materials and other inputs,” according to Marketwatch.

  Fall in Commodities
Delving deeper into the data, a strong dollar did aid the fall in commodities over the last year, pushing down current investment in the sector.
While the US dollar is up over 20% in the last year, the basket of commodities is down more than 30%. The decline in commodities has as much to do with oversupply as it does a strong dollar, nevertheless, current investment in oil and gas related sectors have significantly decreased.
“A 17.7 percent plunge in oil and gas well drilling pulled mining production down 0.7 percent in March, marking the third straight month of declines in mining output. Crude oil has lost more than half of its value since last June, resulting in a sharp drop in well drilling activity. Companies in the oil field are also either postponing or cutting back on capital expenditure projects.
Separately, the Fed in its Beige Book report of anecdotal information on business activity collected from contacts nationwide said investment in oil and gas drilling had declined and related layoffs were reported by ‘multiple’ regions. Caterpillar early this year cut its 2015 profit outlook and warned lower oil prices would hurt its energy equipment business,” according to Reuters.

 

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