Last week, the Federal Reserve reported U.S. industrial production declined 0.8% in October and manufacturing output dropped 0.6%, the third drop in the last 4 months. According to the Fed, “Much of this decline was due to a drop of 7.1 percent in the output of motor vehicles and parts that resulted from a strike at a major manufacturer of motor vehicles.
The decreases for total industrial production, manufacturing, and motor vehicles and parts were their largest since May 2018, April 2019, and January 2019, respectively. Excluding motor vehicles and parts, the index for total industrial production moved down 0.5 percent, and the index for manufacturing edged down 0.1 percent. Mining production decreased 0.7 percent, while utilities output fell 2.6 percent.”
And as the Wall Street Journal points out, the slowdown in U.S. shale-drilling activity is also creating headwinds for domestic manufacturers: “Manufacturers have reported sales declines in recent weeks as lower energy prices prompted a slowdown in domestic production growth. The number of new wells in the U.S.—known as the drilling-rig count—fell by 20% in October from last year, hitting a two-year low,” and contributing to the rather bleak short-term outlook for U.S. manufacturing:
Data released on Chinese industrial production, retail sales, and fixed asset investment were also disappointing last week. CNBC reports, “China’s industrial output grew significantly slower than expected in October, as weakness in global and domestic demand and the drawn-out Sino-U.S. trade war weighed on activity in the world’s second-largest economy. Industrial production rose 4.7% year-on-year in October, data from the National Bureau of Statistics released on Thursday showed, below the median forecast of 5.4% growth in a Reuters poll. Indicators showed other sectors also slowing significantly and missing forecasts with retail sales growth back near a 16-year trough and fixed asset investment growth the weakest on record.” As China’s economic growth has cooled and scrap import restrictions have come into effect, the monthly volume of total U.S. scrap (including ferrous scrap, nonferrous scrap, paper, plastics, etc.) exports to mainland China has dropped from around 1.5 million tons per month back in 2016 to less than 500,000 tons per month currently.