Manufacturing growth in U.S. factories remained flat in June 2015 due mostly to a cutback in the auto industry. This reduction in growth is seen as temporary. Furniture, chemicals, mining and utilities all grew, leading to a growth rate of 0.3 percent for the month.
The slowing pace of manufacturing growth came at a time when Americans cut retail spending, partially due to factors such as a rise in gasoline prices, which reduced orders to U.S. factories. Manufacturers dealt with a strong dollar and weak overseas sales.
However, the winter holiday push for sales remains just around the corner in the United States, so manufacturing growth should rise towards the end of 2015. The labor market remains strong, even if consumer confidence wavered a bit in June. Manufacturing plants gear up for increased sales starting in late September into October to satisfy demands of retailers that sell new appliances in November and December.
Automobile sales may increase when new model years come out. Oil output for American companies rose in June, which means less expensive gas prices in future months when Americans may purchase cars. In terms of oil demand, heating oil output increases as winter weather sets in and companies have more demand to heat American homes.
The good news for manufacturing growth revolves around the quarter-on-quarter numbers. Factory production shrank by 0.8 percent in the first quarter of 2015, but then rose 1.4 percent from April to June. Although automobile production fell 3.7 percent, automakers still produced more than 17 million units in June. This number remains well above recession levels from a few years ago.
Although manufacturing growth slowed, factories expanded at a faster pace in June, adding to expansion in May. Factory output has been the highest since January.
Several things have held manufacturing back in the United States in 2014 and 2015. Fluctuating oil prices based on overseas production slowed production of steel pipes need for oil drilling. The Greek debt crisis changed the value of the dollar; when the dollar is stronger, American goods cost more.
A lack of skilled workers continues to plague manufacturers as the American education system attempts to adjust. The federal government continues to expand incentives, partnerships and grants for companies that help educate workers on new manufacturing techniques and technologies. The feds announced more than $400 million in funding in 2014 to help manufacturers retain skilled workers. This lack of skilled labor increases demand for such jobs, which means salaries increase as companies look for workers in a highly competitive job market.
Although overall manufacturing growth slowed a bit in June 2015, the outlook remains rosy. Americans have jobs, and they need to spend money on school supplies in August, Halloween candy in October, and holiday gifts in November and into December. Manufacturing and retail should see great growth potential by year's end.
Photo courtesy of supakitmod at FreeDigitalPhotos.net
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