Today’s Federal Reserve report that manufacturing production edged down 0.2 percent in February, following a very strong increase in January, continues to demonstrate that this will be a long and slow recovery.
New orders for machinery slowed down for a second consecutive month as output was likely pushed forward to late 2009 to take advantage of expiring business investment tax provisions. Second motor vehicle output contracted sharply. Outside of motor vehicles, manufacturing production was essentially flat, with half of the sectors posting modest increases and half posting modest declines. Overall, production edged up 0.1 percent.
Two-thirds of manufacturing production gains in February was in durable goods, which are more export-intensive than nondurable goods sectors. The increase in durable goods production signals that a rebound in the developing economies is continuing to provide support for U.S. manufacturing sectors. At the same time, production declines in manufacturing industries tied more to the domestic economy, such as nonmetallic minerals, furniture and chemicals, signals that the current recovery remains fragile.
Looking ahead, export-related activity is likely to continue to be the most durable part of the manufacturing recovery