U.S. manufacturing slowing slightly due to drop in auto production

June 15, 2012

Industrial production unexpectedly fell and consumer confidence declined in the U.S., signs that the recovery may be stalling just days before the Federal Reserve convenes a meeting to decide on the potential injection of stimulus money into the economy.

Bloomberg News reported that output at factories dropped last month, but the decline was a mild 0.1 percent after the Fed revised April numbers upward. Consumer sentiment fell to its lowest level for 2012, as fears regarding another recession began to emerge.

"We’re traveling along a canal of miserable growth," Brian Jones, a senior U.S. economist at Societe Generale in New York, told the news outlet. "It’s not fast enough to bring the unemployment rate down or generate an appreciable number of jobs, yet it’s not weak enough that we’re going back into recession."

Economists had forecast slight gains for May, but production dropped slightly due to a slowdown in Europe. Manufacturing helped the U.S. emerge from the recession, according to Bloomberg, but a drop in demand from foreign markets has slightly stalled this growth.

"We are seeing a slowdown in Asia that we had not expected about three months ago, and the United States is not out of the woods yet either when we look at the unemployment numbers," said Clay Jones, chief executive officer of Rockwell Collins Inc.

As the U.S. begins to see foreign demand drop, there is a change that may occur in the sectors, according to an article in Forbes. The trend away from Chinese manufacturing is helping the American industry, and it will likely continue in the coming years.

"Both the U.S. and China are trending towards more localized manufacturing, since the economics of doing business in the U.S. and China are becoming a lot more competitive," Hal Sirkin, a senior partner at the Boston Consulting Group, said during a presentation at the Clinton Global Initiative. "Based on the data we have collected, this trend will not go away anytime soon. This is good news for US companies who want to remain globally competitive and manufacture their products in America."

Another main theme at the CGI event was the increased focus on lean manufacturing principles, adding new technology to increase productivity for all operations and creating a skilled workforce through a public and private cooperative approach.