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October 17, 2019 Blog 1 min read
The fact that manufacturing activity slowed in September was not a surprise, although the degree of slippage was a bit greater than anticipated.

10-17 Industrial Production

Activity in the nation’s factories dipped in September, as a combination of the slowing global economy, uncertainty around trade policy, and the General Motors strike weighed on production. The Fed’s gauge of industrial production fell by 0.4% in September, although an upward revision to the August gain (up 0.8% vs. a previously reported 0.6%) helped to offset the miss. Despite the contraction in September, manufacturing output managed to increase at a moderately positive 1.1% rate in the third quarter.

The decline in automobile production directly linked to the GM strike was a meaningful drag, slicing consumer durables by 2% and total durable goods of 0.7%, while also weighing on demand for durable goods materials. The ripple effect of the strike was clearly felt through the supply chain.

The overarching story for the manufacturing sector remains one characterized by weakness, particularly for those with a heavier reliance on foreign buyers. Exports have been hit hard by the double whammy of slowing growth across much of the world and the bubbling trade war with China.

Without question, the manufacturing sector has been at the economic epicenter and has seen the greatest negative impact, but evidence is mounting that the effects are spilling over into the broad economy as well.

For investors, this uncertainty has manifested itself into greater levels of market volatility as investors attempt to sort out the economy’s biggest issue that will need to be resolved to restore greater confidence in the economic outlook.

At the same time, there are glimmers of hope. If workers ratify the deal that has been reached to end the GM strike, that headwind could dissipate quickly. Indications that some progress has been made toward a limited deal with China has been well received, but hopes have been dashed before. Even if a limited agreement is reached, some of the most contentious issues appear likely to drag out for some time to come.

Still, at this point, any roadblocks that can be removed would be welcome, and could help to stop the bleeding for the nation’s manufacturers.


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