The Federal Reserve has just delivered a major body blow to American domestic manufacturing – not from any supposed monetary policy missteps, but from the annual revision to its manufacturing production data. According to the new numbers, released April 1, domestic industry’s inflation-adjusted growth both recently and since the current economic recovery began have been much weaker than previously estimated. In fact, the revision shows that U.S.-based manufacturing has lost nearly four times as much production ground since the last recession broke out than even the prior downward revision revealed.
The revisions go back to 2011, and although I could not find the previous manufacturing production totals for that year, I do have them for the 2012-15 period. Here’s how the old and new annual real growth data for overall manufacturing for those years compare. (These and the subsequent year-on-year figures are the December-December figures, not the fourth quarter-fourth quarter figures presented in the Fed’s summary release.)
2014-15 +0.46 percent -0.18 percent
2013-14 +4.92 percent +2.52 percent
2012-13 +2.47 percent +0.08 percent
2011-12 +4.37 percent +2.65 percent
Crucially, these revisions show a year-on-year decline in constant-dollar American manufacturing output over the last full-year period. The most common definition of a recession is two straight quarters of falling gross domestic product (GDP). But even though during 2015, real manufacturing production rose sequentially during several months, the sector’s overall shrinkage over four quarters can reasonably be seen as recessionary. Moreover, that manufacturing recession actually lasted even longer – since the cumulative after-inflation production decrease began in November, 2014.
The good news: real manufacturing output rose again on month this January and February, according to the Fed. (The February figure is still preliminary.) So the sector’s last recession is over for now. New industrial production – bringing the story up to March – will be released this Friday, April 15.
Both durable goods and non-durable goods production figures were lowered in the new Fed revisions. For the former, 2014-15 real output was reduced from essentially no growth to a 0.78 percent decline, and 2013-14’s 5.36 percent inflation-adjusted production rise is now judged to have been 3.56 percent.
For non-durable goods, 2014-15 constant-dollar production growth was nearly halved – from 1.02 percent to 0.52 percent. And the previous year’s increase was more than halved – from 2.84 percent to 1.35 percent.
And whereas the previous Fed data show that overall real U.S. manufacturing output was still 1.07 percent lower than at the last recession’s onset in December, 2007, the new figures peg the gap at 3.96 percent – nearly four times larger.
In the world of fast-buck consultants and spin-happy politicians, this sorry record has often been called a “manufacturing renaissance.” In the real world of output, jobs, and wages, it’s called nine lost years – and counting. Put differently, manufacturing’s Great Recession is still far from over.