U.S. manufacturing experiences slow start to year

February 20, 2013

U.S. manufacturing suffered a temporary blip in January after automobile production fell by 3.2 percent, but a series of recently released industry reports suggests that the revival will be back on track sooner rather than later.

According to The New York Times, the drop in nationwide car output was attributed to a quieter consumer market, with an increase in payroll taxes and a slight decrease in industrial production also considered to be factors in the slower-than-expected start to the year. However, new orders continue to be reported by U.S. manufacturing companies, with the New York Federal Reserve Bank revealing that its business conditions index, which monitors factory activity in the Empire State, grew for the first time since July.

"Given that most of the weakness was due to the giveback in motor vehicle production after the 11 percent surge in activity during the last two months of last year, we expect this retreat in industrial output to be temporary," said Millan Mulraine, senior economist at TD Securities in New York, to the news source.

On the consumer spending side, initial indications from the University of Michigan showed that confidence was also on the rise, with its index revealing an increase from 73.8 in January to a predicted 76.3 in February. While the manufacturing industry appears to be moving forward at a slower pace than expected, analysts believe that the sector may mirror the economy, at least in the early part of the year.

"What we are seeing in manufacturing is that growth that had been leading the economy is now roughly keeping pace with the overall economy, and that's likely to remain the case through 2013," said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh, to the news source.

This brief turndown in manufacturing comes just days after President Obama used his State of the Union address to highlight the importance of the industry to the country, with quality management in manufacturing expected to be one reason why companies are looking to invest in the U.S. 

High-profile firms such as General Electric and Apple are bringing manufactured goods back to a U.S. production line, while Siemens has, according to Reuters, reacted to the president's endorsement in his speech by committing itself to manufacturing operations and lean enterprise in North Carolina.

"By manufacturing in the U.S., we get proximity to our largest market; highly skilled workers and crucial software engineers in the Research Triangle," noted Helmuth Ludwig, CEO of Siemens Industry USA. "All in a business-friendly atmosphere."