Dun & Bradstreet Logo

Manufacturing-Laser_shutterstock_97319420_990px
James Bryant

Is US Manufacturing Slowing Down?

by James Bryant | Dun & Bradstreet Editor

April 29, 2015 | No Comments »

Manufacturing-Laser_shutterstock_97319420_990pxUS manufacturing has faced some significant challenges so far in 2015. A brutal winter reduced business activity and a labor dispute at ports on the West Coast created a trade bottleneck. A strong dollar has made US goods less competitive in foreign markets and has widened the trade deficit. Some economists feel these are just speed bumps similar to the slow start experienced in early 2014 before economic growth gained steam later in the year.

However, preliminary US Commerce Department data released Wednesday shows the US economy grew at an anemic rate of just 0.2 percent in the first quarter 2015. This news, along with some other recent Commerce Department data, has folks wondering if there’s more to the US economy’s slow 2015 start than just shaking off the winter doldrums.

New US orders for nonmilitary durable goods, excluding transportation equipment, declined 0.5 percent in March 2015 compared to the prior month. The drop marked the seventh consecutive month of declining durable-goods orders amid low oil prices, a strong dollar, and lackluster demand for US exports. The trade gap in the first quarter reduced US GDP by 1.25 annualized points, which turned a fairly decent quarter into one with virtually zero growth.

Sales by US distributors of durable goods declined in February 2015 for the second consecutive month. The declines marked the largest two-month drop in wholesale durable-goods sales since the end of the recession in 2009. Weakening demand from manufacturers has driven wholesalers’ inventory-to-sales ratio up to its highest point in nearly six years. Overall, wholesale sales of durable goods dropped 7.2 percent in February 2015 compared to the month before. Unsold goods gathering dust on distributors’ shelves could foretell a larger slowdown in US manufacturing. The Commerce Department data shows wholesalers’ stocks of products including machinery, computers, and metals are piling up amid reduced purchasing activity by manufacturers.

Growing inventories, weak business investment amid low oil prices, reduced durable-goods orders, and slow exports have some economy watchers biting their nails about the remainder of 2015, while others are more optimistic. Consumer confidence is strong, and as the spring thaw gives way to summer, folks are likely to spend the cash they’re not spending on gasoline. The sobering news coming out of Commerce makes it less likely the Fed will raise interest rates, which could further spur home-buying activity.

 

Leave a Reply

Your email address will not be published. Required fields are marked *