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NAM: Fed Report Masks Weakness In Manufacturing

National Association of Manufacturers said while overall industrial activity was up, it reflects rising production in mining and utilities, which masks weakness in most of manufacturing.

WASHINGTON -- The Federal Reserve reported that overall industrial activity ended on a high note in the second quarter, but that reflects rising production in mining and utilities and a temporary jump in motor vehicle production, which masks weakness in most of manufacturing, according to the National Association of Manufacturers (NAM).

"Though the manufacturing sector, which accounts for three quarters of industrial output, edged up 0.2 percent during the first increase in three months, the increase was due to a 5.4 percent surge in motor vehicle production," said David Huether, chief economist of the NAM. "This was likely driven by the ending of the strike against American Axle and Manufacturing in May. Outside of motor vehicles, manufacturing production declined by 0.1 percent, the third consecutive monthly decline. For the quarter overall, manufacturing production declined at an annual rate of 3.5 percent, the largest quarterly decline since the fourth quarter of 2001."

Huether added that since production has been down for three consecutive quarters, manufacturing is in a recession.

"The negative effects on manufacturing from the ongoing decline in housing are being exacerbated by skyrocketing energy prices, which are cutting into aggregate domestic demand," Huether said. "One reason why this toxic combination has not yet resulted in an outright recession for the economy overall is that U.S. manufacturers continuing to see growth in export markets."

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