Both factory output and a key measurement statistic for retail sales were down in January, signaling a slow start to the economy this year, according to a report by Bloomberg.
Output for manufacturing was down 0.1 percent from December, mostly due to Boeing halting production of its 737 Max plane. The control group of retail sales, which measures household demand, did not rebound from a hard dip in December.
The data shows that first-quarter growth will not match the 2.1 percent pace from the fourth quarter of 2019. The President Donald Trump administration set a goal of 3 percent. Between Boeing and the coronavirus, many economists are cutting estimates for the first half of the year, while propping up projections for the second half.
“The recent slowing in retail spending initially looked like simple payback for an unsustainably hot streak last spring and summer,” said Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. “However, the duration of the soft patch now looks puzzling in an environment of very healthy household balance sheets, elevated consumer sentiment readings, and reportedly solid labor income growth.”
Some of the slowness can be attributed to lower investment from corporations, weak export markets and the troubles facing Boeing. However, consumer confidence is at a peak, which shows that things can pick up. Gas prices and utility bills are also down, which helps consumers.
“While the economic outlook remains strong enough for the Fed to keep interest rates on hold, personal consumption moderating from last year’s robust pace makes the economy vulnerable to exogenous shocks, such as the halt in production at Boeing and potential supply chain disruptions stemming from the coronavirus,” according to Yelena Shulyatyeva and Carl Riccadonna, Bloomberg economists.
Retail sales were up 0.3 percent, and receipts at gas stations were down 0.5 percent due to cheaper fuel. The coronavirus is testing supply chains and demand in the manufacturing sector.