Investor Alert

July 16, 2019, 10:19 a.m. EDT

U.S. manufacturing ‘is in recession,’ Fed’s data show

Production was flat in June, below expectations of a 0.1% gain

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By Greg Robb, MarketWatch

Bloomberg News/Landov Enlarge Image
A factory worker assembles a Honda SUV door in Alabama. Auto production rose for the second straight month in June.

The numbers: The U.S. factory sector declined in the three months ended in June, the second straight quarterly decline, the Federal Reserve said Tuesday.

For the second quarter, production was down 1.2% after a 1.9% decline in the first three months of the year. Manufacturing fell at a 2.2% rate in the second quarter after a 1.9% drop in the first three months of the year.

For June, industrial production was flat, slightly below the 0.1% gain expected by Wall Street economists.

Compared to 12 months earlier, industrial production rose 1.3%.

Capacity in use slipped to 77.9% in June from 78.1 in the prior month.

Enlarge Image

What happened: In June, increases in manufacturing and mining were offset by a sharp decline in the output of utilities.

Manufacturing output rose 0.4% after a 0.2% gain in May.

Mining output rose 0.2% in June, while utilities output slumped 3.6%.

Within manufacturing, the index for business equipment and for construction both rose 0.5%. The index of consumer goods was unchanged.

Motor vehicle assemblies picked up to a seasonally adjusted annual rate of 11.6 million, for the second straight strong monthly gain.

Big picture: Federal Reserve Chairman Jerome Powell cited the weak factory sector as one reason many policy makers support cutting interest-rates.

What they are saying? “The sector is in recession. That’s not news, it’s a consequence of China’s cyclical slowdown and the trade war. We expect another tough quarter in Q3, but by Q4 we think a trade deal will have been done and China’s economy will be turning up,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.

Market reaction: The Dow Jones Industrial Average /zigman2/quotes/210598065/realtime DJIA +0.36%  opened higher on Tuesday after second-quarter earning reports from some of the largest domestic banks.

US : Dow Jones Global
+92.39 +0.36%
Volume: 350.29M
July 2, 2020 5:19p

Greg Robb is a senior reporter for MarketWatch in Washington. Follow him on Twitter @grobb2000.

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