US: Manufacturing recovery slowing, but broadening out – Wells Fargo

Data released on Tuesday showed industrial production rose 0.4% in August. Analysts at Wells Fargo point out the manufacturing sector’s recovery is slowing, but also shows signs of broadening beyond consumer products.

Key Quotes: 

“Activity in the industrial sector continued to gain back ground in August, but the pace of the recovery had decidedly slowed. Total production was up 0.4% in August. That was less than half the gain expected by the consensus (+1.0%), but came on the heels of July’s gain being revised up to 3.5% from an initially reported 3.0%. As a result, the overall level of production levels was roughly in line with expectations, but the slowdown was more abrupt.”

“Overall, strength remains geared toward products that complement pandemic life, with high-tech industry output continuing to rise and ex-high tech industry output rising less in August and still down from a year ago. But, there are signs the recovery is evening out a bit. Business equipment rose 1.9%, with gains for transit equipment, while machinery and metals industries also saw notable gains. Consumer goods output inched up just 0.3%, held down largely by the pullback in autos.”

“While the strength of consumer goods spending, the weaker dollar and low interest rates all remain supportive of factory activity, gains are likely to moderate further from here.”