WASHINGTON - U.S. manufacturing output fell for a second straight month in February and factory activity in New York state hit nearly a two-year low this month, offering further evidence of a sharp slowdown in economic growth early in the first quarter.
“The economy is spinning its wheels and not gaining any traction yet in this soft patch produced by trade wars and stock market turbulence and the government shutdown,” said Chris Rupkey, chief economist at MUFG in New York.The Fed said manufacturing production dropped 0.4 percent last month, held down by declines in the output of motor vehicles, machinery and furniture. Data for January was revised up to show output at factories falling 0.5 percent instead of slumping 0.
The Atlanta Fed is forecasting gross domestic product will rise at a 0.4 percent annualized rate in the first quarter. GDP grew at a 2.6 percent pace in the fourth quarter. In a separate report on Friday, the New York Fed said its general business conditions index fell 5.1 points to a reading of 3.7 in February, the lowest since May 2017. It was the third consecutive monthly reading below 10, which the New York Fed said suggested “that growth has remained quite a bit slower so far this year than it was for most of 2018.”
The dollar was weaker against a basket of currencies on Friday, while U.S. Treasury prices rose. Stocks on Wall Street were trading higher.In a third report on Friday, the University of Michigan said its consumer sentiment index rose to a reading of 97.8 in early March from 93.8 in February. Strong consumer sentiment bodes well for consumer spending in the months ahead after spending appeared to have retrenched early in the first quarter.
“In addition to trade, risks to manufacturing stem from the labor market, as the scarce supply of workers will also limit growth,” said Stephen Ciccarella, a senior economist at Moody’s Analytics in West Chester, Pennsylvania. “We expect this headwind to intensify over the next few quarters as the labor market continues to tighten.”
Thanks Trump
Not really surprising. The manufacturing rebound (in terms of jobs) was quite soft. Imports are either keeping pace or increasing faster than exports and the structural problem of Trade deficit remaina.
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