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aerospace, aircraft, aircraft parts, apparel, automotive, CCP Virus, electric vehicles, EVs, green manufacturing, leather goods, machinery, manufacturing, medical devices, medical equipment, medicines, miscellaneous durable goods, miscellaneous transportation equipment, pharmaceuticals, plastics and rubber products, primary metals, recession, semiconductors, subsidies, textiles, vaccines, {What's Left of) Our Economy
Since the CCP Virus pandemic began roiling and distorting the entire U.S. economy in early 2020, in U.S.-based manufacturing’s production fortunes have often risen and fallen due to those of the automotive sector. And according to the new official figures that came out last Friday, August was no exception.
A five percent monthly drop in the inflation-adjusted output of motor vehicles and parts – the worst such performance since September, 2021’s seven percent wipeout – helped drag down domestic industry’s total production gain to a mere 0.14 percent. Outside automotive, though, U.S.-based manufacturing actually grew by a solid 0.57 percent in after-inflation terms (the most closely followed metric, and the one that will be used here unless otherwise specified).
But the gyrations of automotive output (August’s automotive tumble followed a 5.15 percent sequential jump in July) contrasted sharply with the stagnation of the domestic industry as a whole this calendar year. During 2023 so far, it’s advanced by a mere two percent, and just shy of 80 percent of the improvement took place between December and January. Since August, 2022, the sector has contracted by 0.66 percent – a recession in technical terms (since this shrinkage has lasted at least two quarters) though not much of one.
Just as striking – since February, 2020, just before the CCP Virus era began, real U.S. manufacturing production is up just 1.16 percent.
The biggest August production winners among the broadest industry-specific manufacturing categories monitored by the Federal Reserve were:
>aerospace & miscellaneous transportation, whose 3.32 percent sequential production pop heated up a long output winning streak. The results were the best since January, 2021’s 4.27 percent burst, and this big, varied sector is now 4.87 percent bigger than last August;
>machinery, where any sign of vibrancy is encouraging for the entire economy, since its products are used in virtually every goods and services industry. And the 2.02 percent production increase its companies registered certainly qualifies. Moreover, this advance was the biggest since December, 2021’s 3.31 percent. But discouragingly, machinery output is still 1.60 percent below last August’s level;
>primary metals, which expanded by 1.58 percent for its best performance since April’s 2.53 percent jump. This sector has been on something of a roller coaster lately. The August rise, for example, was preceded by a 1.57 monthly slide in July that stands as its worse performance since last November’s 3.36 percent fall-off. And yet, primary metals output has increased by 0.69 percent on year; and
>miscellaneous durable goods, a diverse sector whose August production is 1.46 percent higher than in July, but which is down 0;70 percent year-on-year.
Overall, these figures look positive because the above big winners are very big industries.
The biggest losers aside from automotive are much smaller:
>the apparel and leather goods sectors, battered by imports for decades, slumped another 3.50 percent sequentially in August. The months since April have been particularly difficult, with production shrinkage totaling 7.54 percent. On a yearly basis, these industries’ output has contracted by 3.06 percent;
>textiles and products, more sectors long punished by imports, saw output drop by 2.37 percent on month in August, but the decrease followed a 4.22 percent July gain that’s its best since the 5.29 percent jump in June, 2020, early during the strong economy-wide recovery from the devastating CCP Virus recession. All the same, production by these companies has plunged by 6.41 percent on year; and
>plastics and rubber products, where monthly output sank by 1.26 percent in August and has plummeted by 6.64 percent over the past year.
Manufacturing sectors of special importance since the pandemic arrived in the United States in force enjoyed solid, and in some cases excellent, Augusts.
With global air travel nearly back to pre-pandemic levels, aircraft- and aircraft parts-makers boosted their output by 4.79 percent sequentially, This monthly performance was their strongest since July 2020’s 8.02 percent – again, early during the first post-CCP Virus recovery. Year-on-year growth has been an excellent 10.96 percent.
Medical equipment and supplies companies – whose products were so crucial to fighting covid and remain crucial to national healthcare security – lifted output by 2.58 percent in August on month, though year-on-year it’s dipped by 0.92 percent.
Pharmaceuticals and medicines output – also of course key to healthcare security, and including vaccines – turned out 0.71 percent more product in August and 5.49 percent over the last year.
Production in the semiconductor industry – slated to receive massive government subsidies in order to restore domestic output and technological prowess – inched up just 0.25 percent sequentially in August, but the new level represents an all-time high. And annual output has grown by a robust 10.54 percent.
At this point, as Fed officials like to say, it looks like risks to the U.S. manufacturing outlook of stronger growth, weaker performance, and continued flat-lining are “balanced.” On the plus side – those big subsidies in semiconductors, and green industrial products like electric vehicles, are fueling the biggest domestic factory-building boom in decades. So is manufacturing reshoring from overseas. Presumably, those new facilities start churning out lots of product in the foreseeable future, and their very construction creates new customers for U.S.-based industry, too. In addition, the U.S. economy keeps defying recession predictions, suggesting that its underlying strength is greater than many (including me) have expected.
On the minus side, recession fears by no means can be discounted entirely. (A lengthy auto strike obviously won’t help.) Moreover, the continuingly sluggish world economy means anemic-at-best growth in the foreign markets relied on heavily by domestic industry. Sorry to sound like the proverbial two-handed (or even three-handed?) economist, but if you think your crystal ball is clearer, I’d love to hear about it!