Domestic manufacturing has entered a period of output volatility, today’s new Federal Reserve figures indicate. Inflation-adjusted production in May – the latest data – fell sequentially (by 0.39 percent) for the second time in three months, following a six-month streak of sequential improvements. But April’s big rise was upgraded from one percent to 1.16 percent – the strongest such showing since May, 2010’s 1.49 percent, early in the current recovery. At the same time, March’s already downgraded 0.41 percent real monthly output decrease was lowered again, to a 0.75 percent slide. That was the worst such retreat since winter-affected January, 2014’s 1.09 percent.
Automotive revisions figured prominently in these upgrades and downgrades, with April’s initially reported five percent constant dollar monthly production surge now judged to be 4.12 percent. In May, after-inflation output for the sector, which has led generally led manufacturing’s rebound from the Great Recession, tumbled 2.02 percent on month.
Durable goods – manufacturing’s biggest super-sector – was most seriously affected by the auto volatility. Its April monthly real output was boosted to an upwardly revised 1.20 percent – the fastest such pace since February, 2014’s winter-affected 1.80 percent. But its May after-inflation on-month production was dragged down to a 0.84 percent fall – the worst since the 0.99 percent decrease resulting partly from January, 2014’s similarly cold weather.
Non-durables’ production performance has been steadier, with May’s 0.10 percent on-month real gain its fourth such improvement in five months. Moreover, April’s sequential inflation-adjusted production growth was upgraded from an already strong 0.98 percent to 1.10 percent – it best such performance since October, 2008’s 2.15 percent. And non-durables’ annual real output increase of 1.53 percent was its best year-on-year rise since February, 2016’s 1.55 percent.
All the same, the new figures and volatility left domestic manufacturing’s price-adjusted output 3.99 percent less than at its pre-recession peak, more than nine years ago.
Here are the manufacturing highlights of the Federal Reserve’s new release on May industrial production:
>U.S. real manufacturing output fell in May sequentially for the second time in three months. But the 0.39 percent decline – which followed six straight months of sequential growth – was modest compared with many of the March and April revisions, which could be starting a period of new volatility.
>April’s strong initially reported inflation-adjusted output rise of one percent was revised up to 1.16 percent. That was the best such performance since May, 2010’s 1.49 percent, when the manufacturing recovery from the Great Recession was still gathering steam.
>But March’s already downgraded 0.41 percent monthly real production decline was cut further, to 0.75 percent. That was domestic manufacturing’s worst such growth showing since the 1.09 percent fall-off in January 2014, which was affected by harsh winter weather.
>February’s last (downwardly revised) 0.27 percent monthly after-inflation output increase was revised back up to 0.38 percent.
>Some these swings can be traced to the automotive sector, which has led manufacturing’s real growth for most of the current economic recovery.
>April on-month price-adjusted auto production was initially reported to have advanced by five percent – its best growth since July, 2015’s 7.84 percent. Leading the way was a reported 8.04 percent surge in real vehicle output, also the best since July, 2015 (12.38 percent).
>The new April numbers: 4.12 percent and 6.76 percent, respectively. And in May, constant-dollar production fell by 2.02 percent.
>Automotive’s ups and downs most profoundly affected production of durable goods – manufacturing’s largest super-sector.
>The poor May automotive performance contributed to the 0.84 percent sequential durable goods real production shrinkage that month – the worst such decline since winter-affected January, 2014’s 0.99 percent.
>But the initially reported 1.01 April monthly durables production advance is now estimated at 1.20 percent – the super-sector’s fastest growth since the winter-affected 1.80 percent in February, 2014. Combined with the lower automotive results, this development indicated some relative strength outside automotive.
>And thanks to the strong and upwardly revised April monthly figures, durable goods year-on-year after-inflation production gain that month was upgraded from 2.03 percent to 2.22 percent – still the best such increase since January, 2015’s 3.15 percent, which was also affected by harsh winter weather.
>In April, however, the annual durable goods real output improvement sank to 1.66 percent.
>The new Fed figures show that real output in non-durable goods has been steadier than in durables, but April was a standout nonetheless. Their robust sequential output growth of 0.98 percent was revised up to 1.10 percent – which produced the best monthly result since the 2.15 percent recorded in October, 2008 – even before the Great Recession broke out.
>And non-durables followed up by eaking out 0.10 percent monthly inflation-adjusted production growth in May – their fourth such advance in the last five months.
>Further, the 1.53 percent May non-durables annual constant dollar output increase was its best yearly result since February, 2016’s 1.55 percent.
>Yet not even this recent volatility could turn domestic manufacturing into a recovery-era economic winner. The overall sector is still 3.99 percent smaller in real terms than at its pre-recession peak – more than nine years ago, in December, 2007.
>Durable goods real output is up – but by only 0.13 percent – during this time, while non-durables real output is down 9.08 percent from its pre-recession peak, hit in July, 2007.