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automotive, chemicals, durable goods, energy, Federal Reserve, Great Recession, Gulf coast, Hurricane Harvey, industrial production, inflation-adjusted output, Louisiana, manufacturing, natural gas, non-durable goods, oil, recovery, Texas, {What's Left of) Our Economy
Hurricane Harvey’s devastation of the energy-rich Texas and Louisiana Gulf coasts slammed into America’s after-inflation manufacturing output in August as well, as the Federal Reserve’s new industrial production figures showed real manufacturing output down 0.26 percent on month due mainly to fall-offs in chemical industries that use oil and gas as feedstocks. As a result, constant dollar non-durable goods output fell in August by its greatest monthly total (0.86 percent) since January, 2014 (1.20 percent), and overall chemicals production sank by its greatest sequential amount (2.15 percent) since recessionary December, 2008 (4.85 percent).
After-inflation production was off by the greatest monthly totals since that time in basic chemicals; organic chemicals; and especially in resins, synthetic rubber, and artificial and synthetic fibers and filaments. The most affected industry was fibers and filaments, where price-adjusted output plummeted by 9.10 percent – the worst such performance in this volatile sector since November, 2008 (11.25 percent).
Among the bright spots in the August manufacturing production figures: The automotive industry saw its first real output improvement in four months (2.16 percent), and revisions for manufacturing were positive. All the same, America’s real industrial production levels remain 4.03 percent lower than their pre-recession peak – more than nine years ago in December, 2007.
Here are the manufacturing highlights of the Federal Reserve’s new release on August industrial production:
>Hurricane Harvey’s devastation of the energy-rich Texas and Louisiana Gulf coasts devastated enough of the nation’s chemicals industry to create a 0.26 percent monthly sequential drop in real manufacturing output in August.
>The decline was heavily concentrated in chemicals, and especially in sectors highly dependent on Gulf oil and gas as feedstocks.
>The Harvey effects could first be seen in the non-durable goods sector in which chemicals industries are found. Its August inflation-adjusted production decreased by 0.86 percent – the worst sequential performance since January, 2014’s 1.20 percent fall-off.
>The enormous chemicals industry suffered as well, with price-adjusted production down 2.15 percent on month in August – its biggest such decline since December, 2008’s 4.85 percent, at the nadir of the Great Recession.
>Similar multi-year worsts were registered in basic chemicals, organic chemicals, and the resin, synthetic rubber, and artificial and synthetic fibers and filaments grouping. The latter two segments – which often displays volatile production patterns – saw real output dive in August on month by 9.10 percent, the greatest drop since November, 2008’s 11.25 percent.
>The hit to oil refineries so far has been more modest – their constant dollar output was off on month by just 1.93 percent. Nonetheless, this represented the biggest such decline since June, 2014’s 2.06 percent.
>Better news in August was generated by the U.S. automotive sector. Since leading domestic manufacturing out of its deep recessionary slump during most of the recovery, combined vehicle and parts production has tailed off recently – including a July sequential production plunge that has now been revised down (to 4.16 percent) to the worst such performance since June, 2015 (4.48 percent).
>In fact, combined vehicle and parts production had worsened sequentially for three straight months.
>But in August, after-inflation automotive output advanced by 2.16 percent sequentially, and helped the durable goods super-sector grow by 0.30 percent on month.
>In addition, the Fed’s real manufacturing output revisions were positive, including an upgrade for July from a 0.06 percent dip to a 0.04 percent rise.
>In fact, largely because real manufacturing output was so weak in 2016, August’s fair results were enough to push price-adjusted year-on-year output up to 1.63 percent from July’s 1.49 percent.
>Nonetheless, the August Fed figures make clear that U.S. domestic manufacturing has still not full recovered from the Great Recession. In terms of real output, it remains 4.03 percent smaller than its pre-recession high – reached more than nine years ago, in December, 2007.
RealityChek 