Since I needed to finish prepping yesterday for a big trade policy debate held in Washington, D.C. last night (hopefully there will be a video to post soon), I couldn’t get out my analysis of the manufacturing highlights of the June industrial production data released by the Federal Reserve yesterday. So here’s an abbreviated version, and the big takeaway is as follows:
The June monthly real manufacturing output production rebound reported by the Fed masked two disturbing developments. First, just as the May sequential real manufacturing output falloff was led by an automotive sector undermined by a fire at a key parts factory, June’s recovery (a 0.83 percent month-to-month rise) was keyed by the fading of that fire’s effects. Second, the May overall monthly manufacturing downturn is now viewed as considerably steeper (a 1.03 percent slump) than previously estimated (0.63 percent), and revisions for February through April were negative.
The May overall manufacturing numbers worsened because the fire-related damage to automotive production was significantly greater (down 8.75 percent on month) than previous reported (6.45 percent). Indeed, this nosedive was the sector’s worst since the 10.33 falloff in May, 2009 – as a steep, recession-related slide in automotive output was bottoming out.
As a result, it’s no surprise that the June sequential production recovery produced the best monthly increase in constant dollar combined vehicles and parts output (7.77 percent) since July, 2015’s 8.94 percent surge.
The dominant automotive effect was also apparent from the figures for price-adjusted manufacturing production outside that sector – which continued signaling some output softening. In May, the real monthly output drop is now judged to have been 0.43 percent – much bigger than the 0.18 percent decline previously reported. And these industries boosted their real production in June by only 0.14 percent sequentially.
The negative revisions to inflation-adjusted manufacturing output stretched back well past May. April’s previously upgraded 0.57 percent monthly advance was downgraded to 0.53 percent. March’s repeatedly downgraded 0.11 percent sequential decrease is now judged to be a 0.14 percent decline. Only February departed partly from the pattern – its monthly output advance was upgraded back to 1.40 percent after being reduced most recently from that level to 1.39 percent.
The new June figures also showed that inflation-adjusted U.S. manufacturing output still remains 3.50 percent lower than at its peak when the last recession began – more than ten years ago, at the end of 2007.