Manufacturing Production Declined 0.8 Percent in January, Likely Pulled Lower by Poor Weather

By February 14, 2014Economy

The Federal Reserve Board said that manufacturing production declined 0.8 percent in January, the first decrease in output in six months. The reduction in production was likely pulled lower by poor weather conditions, which we have seen in other indicators, as well. Still, the decrease was larger than anticipated, with overall industrial production well below the consensus expectation of a 0.3 percent increase. Mining production was also lower for the month, down 0.9 percent; whereas, utility output – most likely driven by colder temperatures – was up 4.1 percent.

The year-over-year pace of manufacturing output declined from 2.0 percent in December to 1.3 percent in January. Moreover, manufacturing capacity utilization fell from 76.7 percent to 76.0 percent. While these declines are significant, they are likely temporary, to the extent that weather was the main contributing factor.

Looking specifically at the January data, manufacturing output was off mostly across-the-board, with all but four of the 19 major sectors experiencing declines. Durable and nondurable goods production each decreased by 0.8 percent. The largest decline came in the motor vehicle sector, with monthly output down 5.0 percent. Other sectors with substantial losses included wood products (down 2.6 percent), electrical equipment and appliances (down 1.9 percent), textile and products mills (down 1.7 percent), printing and support (down 1.3 percent), food, beverage and tobacco products (down 1.2 percent), and furniture and related products (down 1.1 percent).

At the same time, there were increases in production observed in the computer and electronic products (up 0.9 percent), nonmetallic mineral products (up 0.7 percent), machinery (up 0.6 percent), and apparel and leather (up 0.2 percent).

In short, production and capacity utilization figures for the manufacturing sector were off sharply in January. This was particularly disappointing given the strong increases in demand and output that we saw at year’s end. Indeed, manufacturing production rose 3.0 percent at the annual rate in the second half of 2013, providing some momentum for 2014. Yet, January’s reductions in output were more than likely due to poor weather conditions, which closed some facilities and hampered shipments. To the extent that weather was a contributing factor, I would expect for manufacturing production to rebound in the coming months.

Chad Moutray is the chief economist, National Association of Manufacturers.

industrial production

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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