US Manufacturing Growth Stalls in November
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Despite the end of a crippling strike at Boeing, the US manufacturing sector showed only a modest rebound in November, according to data released by the Federal Reserve on Tuesday, reports Reuters. Factory output rose by just 0.2% last month, falling short of economist predictions for a 0.5% increase.
The underwhelming performance follows a downwardly revised 0.7% decline in October. Production at factories also fell by 1.0% on a year-on-year basis. This decline was partly attributed to the lingering effects of the Boeing strike, which ended in early November, but which continue to suppress production in aerospace and transportation equipment.
Manufacturing, which constitutes 10.3% of the US economy, is struggling to regain momentum in the wake of the Federal Reserve's aggressive interest rate hikes. However, growth is expected to improve next year as interest rates decline. The incoming Trump administration's plans for tariffs on imported goods could, however, push up raw material prices, posing a potential obstacle to manufacturing growth.
While motor vehicle and parts output surged by 3.5% in November, offsetting some of the weakness, production of aerospace and miscellaneous transportation equipment fell by 2.6%. This decline, attributed to reduced aircraft parts manufacturing, follows a 6.7% tumble in October.
Durable manufacturing production rose by 0.7%, buoyed by gains in machinery output. In contrast, nondurable manufacturing output fell by 0.3%, driven by decreases in apparel and leather, petroleum and coal products, and paper production.
Mining output also declined by 0.9% in November, following a slight dip in October. Utilities production fell by 1.3%, impacted by unseasonably mild weather suppressing demand for electricity and natural gas.
Overall, industrial output slipped by 0.1% in November, following a 0.4% decline in October. On a year-on-year basis, industrial output fell by 0.9%.
Capacity utilization for the industrial sector, measuring how fully firms are using their resources, dropped to 76.8% in November, down from 77.0% in October. This is 2.9 percentage points below its average since 1972. The operating rate for the manufacturing sector ticked up slightly by 0.1 percentage point to 76.0%, but remains 2.3 percentage points below its long-run average.