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Economic Mud Season

Here in picturesque New England, there’s winter and summer, but as the air grows warm and the birds come out, we don’t take off our boots just yet. The snow is melting, mucking up the lawn.

And so it is with the economy as well. Amid many spring-like signs, like an improving labor market, a recent undercurrent of softness is muddying up the picture, and this morning we received more data supporting that softness.

The Federal Reserve today reported a 0.2 percent decline in manufacturing in February, with overall industrial production up 0.1 percent on the strength of utility output during the month. January’s industrial production numbers were notably revised downward, from a gain of 0.2 percent to 0.3 percent loss – mainly due to a drop in manufacturing.

Also dragging down the overall industrial production numbers during both months were drops in mining output, as oil wells shut down amid lower crude prices.

The lower manufacturing numbers are likely at least partially related to the weather, but coming after several positive months at the end of 2014, they could also be part of the natural ebbs and flows of the economy, said Bob Hughes, senior research fellow at the American Institute for Economic Research.

“It is definitely another sign of weakness in the economy,” Hughes said. But amid continued job growth, the unemployment level going down, and wages growing slowly, this morning’s data amplifies the dual storyline of the economy, he said.

It’s definitely too early to panic, Hughes said. “But the prudent approach is, you can’t just ignore data.”

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