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The following is an analysis from Daniel J. Meckstroth, Ph.D., chief economist for the Manufacturers Alliance/MAPI, regarding the industrial production report for March 2009:
Hope for Manufacturers- 4/17/2009
“The Federal Reserve Board reports that total industrial production fell 1.5% in the month of March, the same pace of decline as found in February. Manufacturing production declined 1.7% in March and was down 15% from the same month one year ago,” Meckstroth says. “The manufacturing recession remains widespread with 18 of the 20 major manufacturing industries declining in March and all 20 industries showing current production levels that are substantially below that of one year ago. Although virtually every manufacturing industry is declining, the vortex of the recessionary tornado seems to be moving from consumer durables to business equipment and metals. The extremely low factory utilization rate (65.8% in March) and widespread slack in the service sector takes away the need for capacity expanding machinery and equipment. Metals are paying the price of destocking.
“In addition, the collapse in export demand has disproportionally hurt capital goods producers in the United States,” he notes. “First quarter rates of decline help put the manufacturing recession in context. The consensus among economists is that real GDP growth in the first quarter will decline at an annual rate in the 4% to 6% range but manufacturing production fell at a horrific 22.5% annual rate in the first quarter when compared to fourth quarter 2008. Recent reports on retail sales, housing activity and auto sales offer hope that the economy and the industrial sector is forming a bottom and the worst of this recession occurred in the first quarter. We expect the pace of the industrial decline to be much slower going forward and anticipate a return to modest growth early this fall.”