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US manufacturing resilient despite headwinds – Wells Fargo

Discussion in 'Fundamental Analysis' started by FXStreet_Team, Nov 18, 2015.

  1. FXStreet_Team

    FXStreet_Team Well-Known Member Trader

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    FXStreet (Córdoba) - Analyst from Wells Fargo analyzed today’s report on industrial production and concluded that the sector remains resilient.

    Key Quotes:

    “Industrial production fell 0.2 percent despite expectations for a 0.1 percent increase. The weakness was mostly in mining and utilities. Manufacturing output increased 0.4 percent, erasing two months of declines.”

    Manufacturing growth has been trailing broader economic growth throughout this cycle. Having said that, it bears noting that no other sector is more vulnerable to a confluence of factors that hit factories hard: a strong U.S. dollar (which tends to make U.S. manufactured goods more expensive to overseas buyers), weaker global growth (which saps demand for manufactured goods) and a major drop in oil and commodity prices
    (which makes nominal gains in orders and output more difficult to achieve, and also reduces new mining activity, which weighs on demand for manufactured goods like pipes, freight-hauling railcars and trucks).

    “In the face of the headwinds, American manufacturing has proved remarkably resilient. As a case in point, the 0.4 percent increase in October manufacturing production more than makes up for two back-to-back monthly declines and puts the level of factory output at a new high for the current economic cycle.”

    Still, none of the three major challenges described above are abating. Oil prices stubbornly refuse to rise meaningfully, global growth challenges remain and the expected rate increases from the Federal Reserve are likely to keep the U.S. dollar strong.”
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