US industrial production falls 0.3% in January on Boeing woes
- 15 Feb 2020
US industrial production fell 0.3 per cent in January as unseasonably warm weather held down the output of utilities and Boeing Co cut production of civilian aircraft, the Federal Reserve (Fed) said.
The Federal Reserve said manufacturing production fell 0.1 per cent in January, matching forecasts, but December’s manufacturing output was revised lower to a 0.1 per cent gain from a previously reported 0.2 per cent gain.
Overall industrial output for December was revised downward to a 0.4 per cent reduction from a previously reported 0.3 per cent drop.
Economists polled by Reuters had forecast industrial output would fall 0.2 per cent in January, with manufacturing output forecast to be down 0.1 per cent. On an annualized basis, production at factories fell 0.8 per cent in January, mirroring the annualized drop in overall industrial production.
Production of aerospace and miscellaneous transportation equipment fell 7.4 per cent in January after a 0.5 per cent increase in December, the Fed said. The drop reflects Boeing’s January halt in production of its grounded 737 MAX aircraft.
US Treasury Secretary Steven Mnuchin has said that the Boeing 737 halt could cut US gross domestic product growth by as much as a half percentage point this year.
The was somewhat offset by a rise in vehicle assemblies to 11.29 million units on an annualized basis. Manufacturing output excluding motor vehicles and parts fell 0.3 per cent in January.
Capacity usage at factories, mines and utilities fell to 76.8 per cent, the lowest since September 2017, from 77.1 per cent in December.
US utility production fell 4.0 per cent in January after a 6.2 per cent drop in December, while output at mines rose 1.2 per cent in January after a 1.5 per cent increase in December.
The shutdown of Boeing production lines for the grounded 737 MAX continued to undercut US industrial output in January, which declined for the second consecutive month, the Federal Reserve reported.
A boost in auto manufacturing partly offset the drop in aircraft output, but unusually mild weather meant utilities fell for the second straight month as well, according to the monthly data report.
Meanwhile the Treasury Secretary Steven Mnuchin said last week that he expects 2020 US gross domestic product growth to be less than 3 per cent, partly due to problems at Boeing Co, which halted production of its 737 MAX planes over safety issues.
“I think our projections have been reduced because of Boeing and in other impacts, so it will be lower. I think we would have hit 3 per cent but again, Boeing has had a big impact on our exports being the largest exporter,” Mnuchin said in an interview on Fox Business Network.
“I think that could be 50 basis points,” if not more, he said.
“There is no question that the virus will have some impact on global growth and some impact on the US,” Mnuchin said, referring to the coronavirus outbreak originating in China.
White House economic adviser Larry Kudlow said on Friday that President Donald Trump’s administration does not expect the coronavirus will have a major effect on the US economy.
Boeing, struggling to restore public confidence, has halted production of the once fast-selling 737 MAX, which was grounded in March following two deadly crashes. The US economy grew 2.3 per cent in 2019, missing the Trump administration’s 3 per cent growth target for a second straight year and posting its slowest annual growth in three years.
The US construction spending unexpectedly fell in December, posting its first drop since June, as investment in both private and public projects declined.
The Commerce Department said on Monday construction spending decreased 0.2 per cent. Data for November was revised up to show construction outlays rising 0.7 per cent instead of increasing 0.6 per cent as previously reported.
Economists polled by Reuters had forecast construction spending gaining 0.5 per cent in December. Construction spending increased 5.0 per cent on a year-on-year basis in December.
For all of 2019, construction spending fell 0.3 per cent, the first annual decline since 2011, after rising 3.3 per cent in 2018.
In December, spending on private construction projects slipped 0.1 per cent after increasing 0.6 per cent in November. It was pulled down by a 1.8 per cent tumble in spending on nonresidential structures, which includes manufacturing plant and mining exploration, shafts and wells, to the lowest level since November 2018.
Reuters
