U.S. manufacturing output down 0.1%
WASHINGTON — U.S. manufacturing output fell slightly in January, driven lower by Boeing’s decision to halt production of its troubled 737 Max aircraft.
The Federal Reserve said Friday that factory output declined 0.1% last month after eking out a 0.1% gain in December. Excluding the production of airplanes and parts, factory production rose 0.3%.
The figures add to signs that first quarter growth will cool from the previous period’s 2.1% pace, which is in line with what most analysts see as the economy’s capacity but below the Trump administration’s 3% goal.
U.S. manufacturing has shown signs of recovering from a yearlong downturn but is facing a fresh challenge from Boeing’s troubles, which also affect hundreds of suppliers. Manufacturing output is down 0.8% in the past year, hurt by the U.S.China trade war and slower global growth.
Overall industrial production, which includes output from mines and utilities, dropped 0.3% in January, held back by a 4% drop in utility production because of unseasonably warm weather.
Production of aerospace products and parts fell 9.1% in January, reflecting the 737 Max production halt. Boeing received zero orders for all aircraft in January, suggesting production will stay subdued.
Production of motor vehicles and parts increased 2.4%
for the second gain in three months; excluding cars, manufacturing fell 0.3% after a 0.5% increase in December.
Capacity utilization, measuring the amount of a plant that is in use, fell to 76.8% — the lowest since September 2017 — from 77.1%.
Sectors with declines in January included machinery and consumer goods, while computer and electronic products along with fabricated metal gear showed gains.
The viral outbreak in China is also likely to damage the global economy and disrupt many manufacturers’ international supply chains.
Economists at Goldman Sachs forecast that the Boeing shutdown and the coronavirus outbreak will lower the U.S. economy’s growth in the first three months of this year by roughly three-quarters of a percentage point to an annual rate of 1.7%.
Sluggish factory output also highlights the effects of lingering head winds from weak corporate investment and poor export markets.
At the same time, a separate report showed consumer confidence at a nearly two-year high, signaling the potential for a pickup in spending that remains the economy’s mainstay.
Against a backdrop of steady hiring and wage gains, American consumers are also enjoying lower gasoline prices and utility bills.
The Fed’s monthly data are volatile and often get revised. Manufacturing makes up three-fourths of total industrial production and about 11% of the U.S. economy.