This morning’s release of the Federal Reserve’s December industrial production numbers enables us to examine American manufacturing’s growth performance for all of 2014 (though there will be subsequent revisions – starting next month). The big takeaways include domestic industry recording its biggest inflation-adjusted production gains since 2010, a ten-year high in real output of non-durable goods (possibly a long-awaited sign of cheap energy’s manufacturing-boosting effects), and a stark reminder of how heavily manufacturing’s post-recession rebound has depended on the automotive sector.
Here are the manufacturing highlights of the new Federal Reserve release:
>This morning’s data revealed that American manufacturing in 2014 enjoyed its strongest growth year since the start of the U.S. economy’s overall recovery, with the 5.22 percent inflation-adjusted output gain far exceeding 2013’s 2.47 percent. In 2010, manufacturing expanded by an inflation-adjusted 7.05 percent.
>Nonetheless, manufacturing production’s slump during the downturn was so severe (20.48 percent), that the sector is still only 3.43 percent larger in real terms than at the recession’s onset seven years ago.
>Although the automotive sector’s annual growth (7.05 percent) again outpaced manufacturing’s overall performance in 2014, industry’s real star last year was machinery, where inflation-adjusted production jumped by 12.12 percent. That surge was the biggest since 2010’s 21.52 percent surge. Between 2012 and 2013, real machinery output rose by only 2.53 percent – its worst year since its 13.77 percent plummet in 2009.
>Nonetheless, automotive’s influence on real manufacturing output remains undeniable. If that sector is stripped out, manufacturing’s 2014 year-on-year growth falls from 5.22 percent to 4.72 percent. And its expansion since the recession’s December, 2007 onset nosedives from 3.43 percent to 0.48 percent.
>The month-on-month manufacturing picture was less bright, with December real production growth slowing from an upwardly revised 1.34 percent in November (the biggest since the snap back from last year’s harsh winter) to 0.29 percent.
>The original November manufacturing growth figure was 1.15 percent. October’s real production was revised down from 0.45 percent to 0.26 percent.
>Continuing a recent pattern, December’s monthly manufacturing growth was led by the non-durable goods sector – whose 2014 real output increase of 3.83 percent was its best since 1994. Non-durables’ December monthly 0.38 percent real expansion significantly exceeded the 0.20 percent growth of durable goods production – that sector’s worst monthly performance since real output fell in August.
>The pickup in the non-durables sector — which includes major energy users like chemicals and plastics — could indicate that the American energy production revolution and the cheap prices it’s brought are shaping U.S. manufacturing’s performance and structure.
>Dragging down December durables growth was a 0.93 percent decline in automotive production – the fourth monthly drop in the last five months.
>In fact, since its 9.38 percent real monthly output spike in July, automotive production is off by 5.24 percent.
>The entire manufacturing sector’s real annual December 5.22 percent growth represented a pickup from November’s 5.12 percent figure. Year-on-year manufacturing growth peaked in July at 5.29 percent, powered mainly by the automotive spike.
>Durable goods output in 2014 increased by 6.44 percent. In addition, this December year-on-year figure was the sector’s best since the July automotive-led 8.09 percent jump.
>Durable goods output after inflation is now 10.57 percent greater than at the December, 2007 start of the last recession.
>Real non-durable goods production’s strong 2014 growth still left the sector 4.84 percent smaller than at its pre-recession peak, which was hit in July, 2007.