By Fabrice Pierre-Toussaint
According to Reuters, manufacturing production in the United States resurged at an unexpected rate, after a five and a half weeks of strikes by General Motors eventually boosted auto production. The Federal Reserve on Tuesday noted that manufacturing production increased 1.1% last month after a downturn of 0.7% in October. Industrial results rose to 1.1% in November after a downturn of 0.9% in October. Besides motor vehicles and parts, industrial and manufacturing production rose 0.5% and 0.3% respectively. Economists interviewed by Reuters had predicted that manufacturing output would go up 0.7% and industrial output would go up 0.8% in November. Production at factories nonetheless fell 0.8% in November on a year to year basis.
The manufacturing industry, which makes up about 11% of the U.S. economy, was weakened by a 17-month trade war between the United States and China. Last Friday, the world’s two most powerful economies announced a first phase agreement that will reduce some U.S. tariffs in return for major Chinese purchases of American farm products. According to CNBC, industrial output, capacity utilization, a measurement for how fully firms use their resources, increased 0.7 percentage point to 77.3% in November from a downturn of 76.6% in October.
Do to the upward mobility of the manufacturing industry, that result has spilled onto the U.S stock market to make it as upbeat as the results of manufacturing. The S&P 500 recorded its 27% gain this year, mainly as a result of the expectations of the U.S.-China trade deal. Jeff Zipper, managing director of investments at U.S Bank Private Wealth Management in Florida said “The path to least resistance seems to be up right now. Some of that predicated on data and (trade) tensions being less bad and that’s helpful to the market.” Analysis showed that U.S. homebuilding last month rose more than expected, boosted stocks of home improvement chains Home Depot Inc and Lowe’s Cos Inc.
December’s initial trade agreement between the U.S. and China could be a positive output in 2020 if the results continue upward. The Federal Reserve Bank of New York’s Monday analysis showed the results for orders among manufacturers in the state advanced to its strongest since February. The Institute for Supply Management’s national factory index has indicated contraction for four months.
The report showed signs of economic progress and that it could possibly hold up the fourth quarter amid indications that consumer spending, one of the largest part of gross domestic product will be milder than expected. A separate data earlier Tuesday showed construction of new U.S. homes increased more than forecast in November and permits to build increased to a 12-year high. The Federal Reserve’s monthly data are unpredictable and often get reviewed. As one of the largest manufacturing powerhouses in the world, comprising approximately 18.2% of the world’s goods, it is not difficult to inquire how the benefits or disadvantages that the U.S-China trade war is going to bring from now on.