NEW YORK – United States factory production fell in April for a third time in four months with a broad decline led by weakness in machinery and motor vehicles, adding to signs of manufacturing sector weakness. The report shows manufacturing losing momentum amid a trade war with China that’s raised prices and complicated business decisions. Those headwinds are poised to strengthen after President Donald Trump this month threatened fresh tariffs. Production of motor vehicles and parts fell the most in three months, while machinery output shrank the most since 2014. Business equipment fell the most since 2013 while output of consumer goods decreased the most since January, the Fed said.

Treasury Secretary Steven Mnuchin said yesterday that the U.S. is close to resolving the issue of steel and aluminum tariffs imposed on Mexico and Canada, a barrier to getting the U.S.-Mexico-Canada Agreement passed. Mnuchin didn’t provide details about what that resolution would look like.

NAM Chief Economist Chad Moutray weighs in with a prediction about manufacturing output:

  • “The current forecast is for manufacturing production to rise by 1.4 percent in 2019, down from 2.3 percent in 2018. This would suggest some improvement in output data in the coming months, but perhaps at a pace that remains softer than desired.”

The J.P. Morgan Global Manufacturing PMI declined from 50.5 in March to 50.3 in April, the slowest growth rate since June 2016. Among the largest export destinations, six economies had declining manufacturing activity in April, improving from seven in March. Nonetheless, the data continue to suggest softness in the sector globally.

Manufacturers continue to focus on key trade developments at home and overseas, including:

  • Efforts to finalize a durable and enforceable trade deal between the United States and China while tensions and tariffs undermining U.S. manufacturing activity continue to rise;
  • Continued work by the administration and manufacturers to promote passage of the United States-Mexico-Canada Agreement;

”        Manufacturing production continued to disappoint, falling for the third time in the past four months, with output in the sector down 0.5 percent in April. This suggests that slowing global activity has taken its toll so far in 2019. Indeed, manufacturing production has declined 0.2 percent since April 2018, the first negative year-over-year reading since October 2016.

”          More encouragingly, regional economic surveys from the New York and Philadelphia Federal Reserve Banks point to improvements in manufacturing activity in May, and respondents feel upbeat about the next six months.