Chart of the week
Boeing’s decision to halt production of the 737 Max from January onwards dealt a significant blow to production levels in the aeronautics sector, which fell 11% for the month. That said, the fall was undoubtedly lower than many analysts had expected.
Given that aeronautics accounts for 3% of US manufacturing production, the impact on overall production levels accounts for a 0.4% fall. This means that the other industries in the manufacturing sector grew 0.3%, in line with January’s healthy ISM Manufacturing* readings.
The halt in 737 Max production took effect on 1 January 2020, making any further impact in the months ahead unlikely. The fall in annualised first-quarter growth should be limited to around 0.2%.
This limited fall may even be absorbed by the other industries in the manufacturing sector, as long as the COVID-19 epidemic in China does not overly disrupt production lines.
* This index monitors changes in production levels from month to month.
The opinion expressed above is dated 14 February 2020, and liable to change.
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