Manufacturing Flashes Warning Signs as Demand Weakens
The last oasis of prosperity, manufacturing, may be in the initial stages of sliding toward a recession — an ominous trend first identified in the Bloomberg Orange Book, then in the ISM’s purchasing manager indexes. Retail sales — an excellent barometer of the household sector — aren’t encouraging either, once adjusted for inflation.
Manufacturing has benefited from the Federal Reserve’s low interest rate environment. Industrial production advanced 5.4 percent in 2010 and 4.1 percent in 2011. Exports of goods contributed significantly to the growth of the economy. GDP increased 2.4 percent, and exports of goods contributed 1.11 percentage points of that gain in 2010. The following year, exports of goods contributed 0.65 percentage point of the 1.8 percent increase in total output. That doesn’t include domestic manufacturing.