The Federal Reserve’s new industrial production data for October show that, on a monthly basis, real U.S. manufacturing output has fallen on net since July, marking its worst three-month production stretch since March-June, 2011. Largely responsible is the automotive sector’s sudden transformation from a manufacturing growth leader into a serious growth laggard, with combined real vehicles and parts production enduring its worst three-month stretch since late 2008 to early 2009.
Combined vehicles and parts output has now fallen after inflation for three straight months since booming between June and July. These industries have not experienced this kind of decrease since the October, 2008-January, 2009 period, when the financial crisis was creating the worst U.S. recession since the Great Depression.
Automotive’s troubles, in turn, have dragged month-on-month real growth rates in durable goods production below real monthly growth rates in non-durable goods output for the last three months as well, reversing a pattern that has prevailed since the recession officially began in December, 2007.
On a year-on-year basis, moreover, whereas inflation-adjusted growth in durable goods production has been slowing since May, real year-on-year output in non-durables has been speeding up during this period.
According to the Fed, real manufacturing production grew by only 0.19 percent on month in October. This sluggish expansion, along with a September output expansion figure cut from 0.47 percent to 0.21 percent, pushed real manufacturing production fractionally (0.02 percent) lower than July levels.
Other Fed monthly manufacturing revisions were better, with August’s 0.46 percent monthly falloff (the first since January) now pegged at 0.42 percent, and July’s 0.84 percent increase revised up to 0.87 percent. May’s monthly growth figure remained at 0.39 percent.
In addition, September’s modest monthly growth combined with these revisions have left total inflation-adjusted manufacturing production just 1.42 percent higher than the level it hit when the last recession broke out, in December, 2007.
So far, much of manufacturing’s recovery since the mid-2009 end of the recession has been led by a torrid automotive sector. Yet in October, after-inflation output of vehicles and parts makers dropped for the third straight month – its first such stretch since the frightening period between the fall of Lehman Brothers and President Obama’s first inauguration.
Without the automotive sector, moreover, real manufacturing output since the recession’s onset is now down 1.19 percent. With automotive, inflation-adjusted production is up 1.42 percent since then.
Further, according to the September figures, manufacturing’s year-on-year growth has now slowed since July, though it remains above even figures in the spring, following the sector’s recovery from harsh winter weather.
Year on year, manufacturing in October grew by 3.74 percent – a slowdown from the September rate of 4.02 percent that itself was revised down from 4.11 percent. August’s 3.87 percent gain was revised up to 4.04 percent, and July’s was revised up from 5.02 percent to 5.23 percent. The October year-on-year growth was also slower than that for May (3.80 percent) or June (3.86 percent).
The October figures also broke a string of 2013-14 monthly year-on-year real manufacturing output increases that exceeded their 2012-13 counterparts. From October, 2012 to October, 2013, inflation-adjusted manufacturing production rose by 4.01 percent, versus 3.74 percent for 2013-14.
October’s monthly real automotive production decline of 1.18 percent followed a September drop that was downwardly revised from 1.40 percent to 1.89 percent. August’s 6.93 percent nosedive (originally estimated at 7.63 percent) was revised back down to 7.15 percent, and July’s big jump (originally estimated at 9.25 percent) was revised down from 9.39 percent to 9.37 percent.
October year-on-year real automotive output grew by 4.69 percent – lower than the 5.06 percent rate for September that itself was revised down from 5.70 percent. The October pace was also much lower than the 8.84 percent yearly growth in August (revised down from 8.96 percent), and of course much lower than the unusual 21.72 percent gain in July (revised up from 21.63 percent). But the October year-on-year growth also badly trailed the 7.63 percent rise in June (revised up from 7.52 percent) and the 8.90 percent increase in May (revised up from 8.79 percent).
The longstanding gap between the fortunes of America’s durable and nondurable goods manufacturers remained substantial as of September, but the nondurables sector continued a recent trend of catching up.
Thanks largely to the automotive dip, October real durable goods production rose just 0.09 percent over September levels. Just as discouraging, September’s 0.45 percent monthly growth was revised down to just 0.15 percent, and its 0.96 percent October drop was revised down to one percent.
On a year-on-year basis, inflation-adjusted durables output has continued its slowdown from 5.80 percent in May to 5.13 percent in September (revised down from 5.80 percent), to 4.60 percent in October..
Since the recession’s December, 2007 onset, durable goods production is up 8.52 percent in real terms.
Nondurable goods production’s real growth exceeded that of durable goods production for the third straight month in October (0.32 percent versus 0.09 percent). But September’s 0.49 percent monthly increase was revised down to 0.28 percent. At the same time, in contrast to the recent deceleration in yearly durable goods output, year-on-year nondurables after-inflation production has been speeding up – from 1.57 percent in May to an upwardly revised 2.77 percent in September to 2.78 percent in October.
Since its pre-recession July, 2007 peak, nondurable manufacturing output is still down 6.78 percent in inflation-adjusted terms.