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U.S. Manufacturing Growth Stumbles

Written By Brian Hicks

Posted May 17, 2013

Americans have been crossing their fingers lately hoping for whatever good news could possibly be offered up in regards to the economy. This week, however, the country hasn’t exactly gotten the good news it has been hoping for.

Bloomberg reports that New York area manufacturers have seen lower numbers than expected, serving as a surprise to those who have been resting on high hopes that the U.S. economy is improving quickly.

factory jobsThe general economic index of the Federal Reserve’s Bank of New York hit -1.4 this month, falling from 3.1 seen in April. This fall below the “zero” mark is a signal of contraction, which affects New York as well as parts of New Jersey and Connecticut.

It’s not only a fall in factory production that has caused economic numbers to stumble this week, however. The Payroll Tax Cut, which was in effect throughout 2011 and 2012, gave Americans (whether illusory or not) a little extra money to play around with in terms of spending each month.

With the full tax rate back in effect, Americans are doing whatever they can in order to reach the same type of balance they’ve struck with the extra money in their pockets. Most say that instead of allowing this to affect how they save, they’re going to be cutting spending, hence further weakening the U.S. economy.

A Tough Short-Term Future

Any time there is a faltering in any aspect of the economy, investors and analysts always start looking at where things could go in the short-term.

In many scenarios, short-term improvements can at least be hypothesized; the same cannot be said for the growth of factory production in the U.S.

There are a lot of factors that are keeping American factories down. A decrease in new orders, for example, can have a direct effect on the employment of new workers in American factories. It should come as no surprise, then, that the rate of factory worker employment has indeed decreased.

The one sign that things could improve for U.S. factories is that companies have been holding steady inventories, even though sales have fallen. While it’s unclear as to what the end result of this will be, the possibility exists that orders could increase in the future or possibly even in the short-term.

It’s important to note that an improving U.S. economy isn’t necessarily affected dramatically by factory production rates. Of course, higher rates will bode well for a strengthening economy, but there are plenty of other factors that need to be taken into consideration.

An improving housing market, for example, has been very helpful towards making the case for a better economy than America has seen in years, it has seen a rise in retail spending overall.

Numbers coming out of New York area factories may be surprising, but they aren’t enough to completely throw the U.S. economy into a massive downward spiral.

An Interesting Stock Market 

Pay attention to where things have been going in the stock market as of late, and it’s a little difficult to assume that the U.S. economy is stumbling in terms of growth. Stocks have been hitting record highs recently, with numbers continuing to increase, making a case for an economy that is on the up and up. 

It’s no secret that the economy is in flux, however, which is why it’s so important for investors to be sure they’re happy with the decisions they end up making. At the moment, many are looking towards tech stocks, such as Google’s (NASDAQ: GOOG) new streaming music platform.

Given the fact that the market value of Google has recently topped $300 billion for the first time, it should stand to reason why the company’s stocks are being watched closely.

While gold is not exactly in the greatest shape price-wise, now might be the perfect time for new investors to get involved. Historically, faltering economic numbers have boded well for the metal, which has many thinking now might be a repeat of what has happened in the past. 

It’s unclear as to where the future of gold will go, but most analysts believe that falling numbers cannot last forever.


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