WASHINGTON -- The National Association of Manufacturing (NAM) said Monday that the Federal Reserve report of a 0.5 percent decline in industrial production points to weakness in the housing and auto sectors.
According to the report, the manufacturing sector, which accounts for almost 80 percent of industrial output fell by 0.3 percent last month.
“The ongoing housing downturn continues to weigh heavily on a number of manufacturing industries,” said David Huether, NAM’s chief economist. “The drop in manufacturing output last month was led by 3 percent declines in both furniture and wood product production. At the same time, motor vehicle production dropped by 1 percent. This is the fifth decline in the past seven months and partly the result of higher energy costs, as well as the negative wealth effects stemming from lower home prices.”
Huether also notes that other manufacturing industries, including computers and electronic products, machinery, medical equipment and aerospace, have experienced gains in production. This indicates that although the sector isn’t in a recession, it is struggling.
“With the housing downturn expected to last throughout the year, and the spillover effects into consumer spending likely to intensify, the manufacturing sector will likely experience modest domestic demand in the first half of this year,” Huether said. “This will be partly offset by continued robust export growth. As a result, the manufacturing sector is in a better position today than it was in 2001 when dual declines in both domestic demand and exports sent the manufacturing sector into a sharp contraction.”
