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What the Fall in Manufacturing Production Hours Means

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Oct. 26 2017, Updated 3:27 p.m. ET

Manufacturing activity fell in September

Activity in the manufacturing sector (FXR) decreased marginally in September. The U.S. Bureau of Labor Statistics released the manufacturing data after its establishment survey. This economic indicator gives insight into the health of the manufacturing sector. A decrease in the number of worked hours in the sector is an indication that the company is expecting demand to decrease soon.

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Manufacturing average weekly hours decreased 0.2 hours

According to the latest data, in September 2017, the average working hours for production workers decreased from 42.0 in August to 41.8 in September. August average weekly hours were revised lower from 42.2 to 42.0.

This leading indicator had a net negative contribution of 0.13 to the leading economic index in September. The decrease in jobs was evident in many sectors due to hurricanes during the survey month. The sector is expected to pick up in October as production returns to normal.

Key industries and ETF performance

The largest ETF by market capitalization in this sector is the Industrial Select Sector SPDR ETF (XLI), which has a year-to-date return of 17.2%. Hopes for tax cuts by the Trump administration have boosted the sector’s outlook in recent months. In the last month, XLI has risen more than 3.0%.

In the next part of this series, we’ll analyze the impact of the weekly jobless claims on the Conference Board Leading Economic Index.

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