GM Strike Led to 0.5% Output Dip, Fed Says
The General Motors Corp. strike caused a 0.5% drop in U.S. industrial output in March, but discounting the walkout’s broad impact, production grew 0.3%, the Federal Reserve Board reported Tuesday.
“Excluding GM, the manufacturing sector is holding its own and will experience improving conditions by summer,” contended Mark Zandi, an economist with Regional Financial Associates in West Chester, Pa.
Jerry Jasinowski, president of the National Assn. of Manufacturers, agreed. “After flirting with negative growth late last year, we are back on a slow growth track,” he said.
The seasonally adjusted decline reported by the Fed was the second in three months attributed to special factors.
Output at the nation’s factories, mines and utilities slipped 0.3% in January because of the blizzard that froze much of the eastern part of the country. The drop was less than the 0.4% decline initially reported.
Production heated up as the weather settled down a month later, jumping 1.3%, the largest hike since an identical gain in October 1987. The last time output grew faster was February 1987 when it shot up 1.4%.
But growth stalled in March when 2,700 auto workers went on strike at two GM factories, causing a parts shortage that eventually closed 26 of its 29 North American plants. U.S. motor vehicle production plunged 14.9%.
In addition, the walkout halted work at many of the auto maker’s independent suppliers.
As a result, overall output posted the steepest decline since a similar 0.5% drop in October.
But many analysts said auto production is rebounding in April. Manufacturers have boosted production and reported increased sales.
In March, output of construction supplies was the strongest segment of manufacturing, Zandi said, and “given the current high levels of home building and accelerating gains in commercial construction, that component should continue to provide some growth through the first half of ’96.”
Production of computers and other office equipment also remained robust.
“I think the story is that the inventory correction which has plagued manufacturers for the past year is over,” Zandi said. “That lays the groundwork for stronger production gains--not booming conditions, but at a moderately expanding, noninflationary pace.”
The Fed also said the nation’s industries were operating at 82.5% of capacity in March, down from 83.2% a month earlier and 84.6% a year earlier.
The rate suggests that production bottlenecks are not developing that could cause shortages and higher prices.
The report also showed output expanded at a 2.7% annual rate in the first quarter, up from 0.6% during the final three months of 1995. The improvement largely reflected resumption of aircraft production after the Boeing Co. strike late last year.
The Fed said factory output fell 0.8% in March after rising 1.5% a month earlier.
Production of durable goods--goods such as motor vehicles and machinery expected to last more than three years--plunged 1.4%, nearly wiping out a 2% gain the previous month.
Production of nondurable goods such as clothing and chemicals edged up 0.1% after climbing 0.9% in February.
Mining production shot up 2% on top of a 1.6% advance a month earlier. Output by the nation’s utilities grew 0.7% after falling 1.1% in February.
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Industrial Production
Seasonally adjusted index, 1987=100
March 1996: 123.5
Source: Federal Reserve Board
