Tags

, , , , , , , , , , , ,

Here’s all you need to know to recognize that domestic U.S. manufacturing is experiencing some kind of slowdown: Today’s real output numbers from the Federal Reserve showed that production flat-lined on month in March. And that was a significant improvement from the comparable February figure – a 0.37 percent drop!

So do these dreary results mean that tariff fear-mongers are finally right to claim that President Trump’s levies on imports of steel and aluminum, and on a wide range of goods from China are backfiring on American industry? Not according to the internals.

As has been the case for months, the most convincing evidence comes from the metals-using industries. After all, the tariffs affecting their products have been in place longer. (April was the first full month in which they were in effect.) The most relevant industries are easy to identify. And because (with despite numerous exemptions) the tariffs have been virtually worldwide in scope, there’s no need to wonder whether how extensively the steel and aluminum in question are being supplied by an individual country or even group of countries.

The table below presents the inflation-adjusted output changes in major metals-using industries from April through each of the Fed’s last three data months. This format differs from that used in my previous industrial production-related posts because late last month the Fed released a set of revisions going back to 2015. So rather the old and new figures for the previous data month aren’t comparable anymore, and I simply decided to use the new figures going back three months.

                                            April thru Jan.      April thru Feb.     April thru March

overall manufacturing:      +1.20 percent        +0.83 percent         +0.82 percent

durables manufacturing:   +2.05 percent        +2.05 percent          +1.96 percent

fabricated metals prods:   +3.53 percent        +3.08 percent          +2.85 percent

machinery:                       +4.33 percent         +2.24 percent         +2.71 percent

automotive:                      – 2.84 percent         -0.58 percent          -3.06 percent

major appliances:             -1.83 percent          -1.30 percent         -5.62 percent

aircraft and parts:            +5.45 percent         +6.15 percent         +7.43 percent

An overall manufacturing slowdown is apparent from the February and March columns in the top line. And the second line shows that it’s impacted durable goods to a slightly greater extent – a possible signal of a tariff effect since that’s the super-category in which the main metals-using sectors are located.

But tariff-mageddon claims, as has been the case so far, falter upon looking at the details. First, they’re not very consistent with the volatility much of this data display. (E.g., automotive and appliances.) Second, over the past month, the big machinery sector (which provides equipment serving many different markets) has gained momentum. And aircraft and parts-making just keeps growing faster and faster. (Of course, its performance will likely become a drag on manufacturing output going forward because of Boeing’s 737 Max problems and the damage that will harm not only aircraft production, and possibly the industry’s entire supply chain.)

If tariffs are becoming a challenge for these industries, it’s clear that their impact is being swamped by other influences on their performance – especially the distinctive characteristics and status of their individual markets.

Unfortunately, all of the reasons for considering these metals tariffs-related conclusions compelling cut the opposite way when it comes to evaluating the China levies’ impact. The first full month when the earliest were in place was only August. And identifying industries most plausibly affected is difficult both because the tariff list and the industrial production data use different manufacturing classification schemes, and because of the challenge of figuring out where tariff-ed Chinese products play crucial roles in American industry (in the form of parts, components, materials, and other intermediate goods).

As a result, the bottom line remains that only a handful of manufacturing industries look like strong candidates for producing any kind of a China tariff effect, and most of these suffer from one of the above complications. Sharp-eyed RealityChek regulars will notice that I’ve added oil and gas drilling platform parts to the list:

                                            Aug. thru Jan.       Aug. thru Feb.      Aug. thru March

overall manufacturing:      +0.29 percent         -0.08 percent          -0.09 percent

ball bearings:                     +0.27 percent        +0.19 percent         +0.11 percent

industrial heating equip:     -3.61 percent         -3.39 percent         -5.27 percent

farm machinery & equip:  +2.22 percent       -17.14 percent        -11.65 percent

oil/gas drilling platfm pts: +4.74 percent        +4.59 percent         +4.36 percent

The overall manufacturing slowdown is apparent from these statistics, too. But so is a bewildering range of results, along with a small sample size. Whatever problems American industry might now be facing, the case that tariffs bear much, if any, blame has yet to be supported by these or any other data.

Advertisements