Hey! I’m a manufacturing geek (among other things)! It’s part of what I do! Even so, I hope you agree that it’s worth looking in some detail at yesterday’s U.S. manufacturing output report from the Federal Reserve – because it offers a first look at domestic industrial winners and losers in the Age of the CCP Virus.
As always, these numbers will show inflation-adjusted production changes from month to month – in this case, between February and March. Of course, the time lag means that these data only partly reflect the first wave of the full CCP Virus hit.
As I wrote yesterday, that hit has been hard for domestic manufacturing as a whole – its real output sank by 6.27 percent on month – the biggest such fall-off since the post-World War II demobilization in 1946!
Looking at the super-categories first, the biggest sequential production nosedive came in durable goods – which are supposed to be usable (or shelve-able) for at least three years. Think steel, motor vehicles and parts, machinery, aircraft and parts, home appliances, information technology hardware and the like – include medical products except for pharmaceuticals and vaccines. Constant dollar production of these products plunged by 9.14 percent. So they fared much worse than manufacturing as a whole, and that’s especially discouraging since they’re the bigger of the two super-sectors.
Speaking of which, the other super-sector – non-durable goods (which include textiles and apparel, pharmaceuticals and all other chemicals, plastics and resins, petroleum products, paper, and foods and beverages) – saw a monthly real output decrease of only 3.21 percent.
But we can go into much more detail than that. For convenience sake, let’s limit ourselves to examining industries classified at the 3-digit level of the North American Industry Classification System (NAICS), the U.S. government’s main typology for slicing and dicing the entire economy. Here are the results for the February to March period, leading off with the durable goods sectors.
Wood products: -4.22 percent
Non-metallic mineral product: -6.56 percent
Primary metal: -2.82 percent
Fabricated metal product: -8.28 percent
Machinery: -5.56 percent
Computer and electronic products: -1.89 percent
Electrical equipment, appliances, and components: -2.24 percent
Motor vehicles and parts: -28.04 percent
Aerospace & miscellaneous transportation equipment: -8.12 percent
Furniture and related products : -9.99 percent
Miscellaneous manufacturing: -9.94 percent
(contains most of those non-pharmaceutical healthcare goods)
Clearly, these results are all over the place, with the automotive sectors being the big standouts. Within automotive, the biggest losers were vehicles factories, where after-inflation production cratered by 34.76 percent. Real parts output was off “only” 21.80 percent.
In fact, leaving out these two automotive industries, inflation-adjusted durable goods output fell by just 5.84 percent – versus the 9.14 percent plummet including these products. And real manufacturing production would have been down by just 5.84 percent, not 6.27 percent.
Also of note: Aircraft and parts production dropped by 10.36 percent, for reasons partly due to the CCP Virus (and the impact on air travel), but also partly due to Boeing’s long-running safety problems. In fact, the March results mark the first that indicate major Boeing-related losses – although surely the impact has been felt previously throughout a vast domestic supply chain that includes lots of industries outside the aerospace complex as such.
Here’s the list of non-durable winners and losers:
Food, beverage, and tobacco products: -0.76 percent
Textiles: -14.05 percent
Apparel and leather goods: -16.54 percent
Paper: -2.04 percent
Printing & related activities: -18.18 percent
Petroleum and coal products: -5.93 percent
Chemicals: -1.65 percent
Plastics and rubber products: -7.60 percent
Other manufacturing (different from miscellaneous): -5.37 percent
As with investment, past results are no guarantee of future performance, especially since the new economic slump is biologically, not economically caused. But some of these figures look like they have staying power – e.g., we’ll continue eating, we’ll keep using computers, we won’t be flying as much. One big puzzle – will car buying stay this depressed? As I like to say, my crystal ball is far from crystal clear. But that just makes it all the more important to keep track of these detailed manufacturing production figures as they come in, especially what leads an economy down is often what leads it back up.