(What’s Left of) Our Economy: Revisions Take U.S. Manufacturing’s Solid Pandemic-Era Performance Down a Notch

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aerospace, aircraft, aircraft parts, apparel, appliances, CCP Virus, chemicals, computer and electronics products, coronavirus, COVID 19, durable goods, electrical components, electrical equipment, fabricated metal products, Federal Reserve, furniture, inflation-adjusted output, machinery, manufacturing, medical devices, miscellaneous durable goods, miscellaneous nondurable goods, nondurable goods, nonmetallic mineral products, paper, petroleum and coal products, pharmaceuticals, plastics and rubber products, printing, real growth, recession, semiconductors, textiles, wood products, Wuhan virus, {What's Left of) Our Economy

Sharp-eyed RealityChek readers have no doubt noticed my habit of noting that “final” versions of official U.S. economic data are typically final only “for now.” That’s because Washington’s statistics gathering agencies, to their credit, look back regularly on several years’ worth of figures to see where updates are needed because new information has come in, and this morning, the Federal Reserve released its own such “benchmark” revision of its manufacturing production data.

The results don’t contain any earthshaking changes, but they do alter the picture of domestic industry’s inflation-adjusted growth during the pandemic period, as well as of the performance of specific sectors, in non-trivial ways.

The main bottom lines: First, the Fed previously estimated that U.S.-based manufacturers had increased their constant dollar production from February, 2020 (the month before the CCP Virus’ arrival in force began roiling the entire American economy) through last month, by 4.94 percent. Today, the Fed told us that the advance was just 4.12 percent.

Second, as a result, domestic industry has further to go in real terms to recover its all-time high than the central bank had judged. As of the last regular monthly industrial production increase, U.S.-based manufacturing was 2.41 percent smaller after inflation than in December, 2007 – still its peak. But the new figures show that these manufacturers are still three percent behind the after-inflation output eight-ball.

Third, and especially interesting given the recent, significant U.S. growth slowdown and distinct possibility of a recession before too long, the revisions add (though just slightly) to the evidence that the overall economy’s woes this year are indeed beginning to affect manufacturing. Before the revision, the Fed judged that real manufacturing output had expanded by 2.68 percent between last December and this May, and slipped by 0.07 percent between April and May. The new figures: 2.46 percent and -0.22 percent, respectively.

The virus-era downward revisions affected durable goods and nondurable goods industries alike. The previous price-adjusted growth figure for the former during the pandemic period was 6.31 percent. Now it’s pegged at 5.18 percent. For the latter, the downgrade was from 3.42 percent to 2.99 percent.

Before the revisions, of the twenty broadest sub-sectors of manufacturing tracked by the Fed, only five suffered inflation-adjusted production declines from immediate pre-pandemic-y February, 2020 through this May, and all were found in the nondurables super-category. They were miscellaneous non-durable goods (down 11.43 percent), textiles (down 3.80 percent), paper (2.33 percent), printing and related activities (1.89 percent), and petroleum and coal products (1.21 percent).

The new data show that the number of growth losers has expanded to eight;. Four sectors were added: fabricated metals products (down 1.30 percent), nonmetallic mineral products (1.06 percent), apparel and leather goods (off by 0.59 percent), and furniture and related products (0.17 percent). And petroleum and coal products’ contant dollar production was upgraded from a 1.21 percent decrease during the pandemic period to a 2.96 percent gain.

The names on the list of top five pandemic period growers remained the same, with after-inflation production actually improving in aerospace and miscellaneous transportation (from 18.99 percent to 19.69 percent), miscellaneous durable goods (from 11.41 percent to 12.43 percent), and machinery (from 6.29 percent to 6.52 percent). But real production gains were revised down in computer and electronics products (from 10.42 percent to 7.38 percent), and chemicals (from 8.48 percent to 7.55 percent).

In absolute tems, the biggest price-adjusted output upgrades were registered in miscellaneous nondurable goods (from an 11.43 pecent nosedive to a smaller drop of 7.56 percent), electrical equipment, appliances and components (from a 2.19 percent rise to one of 4.95 percent), the aforementioned petroleum and coal products sector, wood products (from a 5.24 percent increase to 6.45 percent), and plastics and rubber products (from 1.78 percent growth to 2.76 percent).

The biggest real production downgrades came in the printing sector (all the way from a 1.89 percent inflation-adjusted output shrinkage to one of 9.52 percent), apparel and leather goods (from a 4.59 percent real production rise to a 0.59 percent dip), nonmetallic mineral products (from 2.58 percent price-adjusted growth to a 1.06 percent decline), and the aforementioned computer and electronics product sector.

RealityChek has been following with special interest narrower sectors that have attracted unusual attention since the CCP Virus arrived, and the new industrial production revision shows that constant dollar output climbed by more than previously estimated in aircraft and parts (24.89 percent versus 19.08 percent) and medical equipment and supplies (14.48 percent versus 11.51 percent), and by less in semiconductors and other electronic components (22.48 percent versus 23.82 percent) and in pharmaceuticals and medicine (12.79 percent versus 14.78 percent).

These Fed revisions are hardly a reason to push the panic button about U.S. manufacturing. But because domestic industry’s fortunes during the pandemic era have been so closely tied to blazing hot demand for its products, it’s hardly great news to learn that with signs abounding of a slumping American economy, manufacturing is approaching this apparent downturn in less robust shape than thought as late as yesterday.   

(What’s Left of) Our Economy: Back into Decline for U.S. Labor Productivity

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durable goods manufacturing, labor productivity, manufacturing, multifactor productivity, nondurable goods, nonfarm business, productivity, total factor productivity, {What's Left of) Our Economy

Well, that didn’t last long. After two straight quarters of encouraging growth, U.S. labor productivity is back in the doldrums, with this morning’s preliminary data from the Labor Department revealing a drop during the third quarter of this year.

At least, however, these latest figures on the narrowest measure of the economy’s efficiency, and ability to grow healthily and generate sustainably rising living standards contained a novel recent twist: U.S.-based manufacturing outperformed the Labor Department’s main definition of the broader economy – the “nonfarm business sector.”

Moreover, the results pointed to a trend I hadn’t recognized till now: Manufacturing’s transformation from a national productivity leader into a laggard, which began during the current economy-wide recovery (and probably began during the Great Recession preceding it) is heavily concentrated in nondurable goods manufacturing. Labor productivity in the larger durable goods super-sector is still growing faster than that of nonfarm businesses, though the gap between the two has shrunk decidedly.

As known by RealityChek regulars, labor productivity measures how much output an American worker turns out for each hour he or she is on the job. It’s not as broad a gauge as “total factor productivity” (AKA “multifactor productivity), which measures output per hour resulting from a wide array of inputs, including not only human beings but capital, energy, materials, and others. But the labor productivity numbers come out on a timelier basis.

The news for the second quarter’s final (for now) data was pretty good. The increase in nonfarm business labor productivity was upgraded from a 2.3 percent annualized rate to 2.5 percent. Manufacturing’s 2.2 percent annualized drop, however, was revised down to a 2.4 percent decrease – its worse such performance since the four percent plunge in the third quarter of 2017.

This morning’s first initial read on third quarter labor productivity reversed this pattern. Nonfarm business labor productivity was down 0.3 percent on an annualized basis – worse than the 0.1 percent dip for manufacturing, and its first shrinkage since the fourth quarter of 2015 (when it fell by 3.5 percent annualized).

But it was the more detailed figures on manufacturing’s third quarter that really caught my eye. Durable goods sectors’ labor productivity performance was in the black, growing at a 1.2 percent annual pace. But the nondurables result was deep in the red – down 1.5 percent.

Nor are these results aberrations, as the table below shows. It presents the total labor productivity growth rates during the previous two economic recoveries and the current upturn (to ensure the best, apples-to-apples findings). The main takeaway: Both super-sectors have suffered major labor productivity growth rates declines since the 1990s expansion. But during the current recovery (the longest on record in the United States), labor productivity growth in nondurables plummeted much faster than in durables (which wasn’t killing it on this front, either).

                                                                                  Durable mfg    Nondurable mfg

1990s expansion (2Q 1991-1Q 2001):                   +66.11 percent  +23.81 percent

bubble expansion (4Q 2001-4Q 2007):                 +34.59 percent  +24.01 percent

current expansion (2Q 2009 thru final 2Q 19):     +15.37 percent    +5.83 percent

current expansion (2Q 2009 thru prelim 3Q 19):  +15.71 percent    +5.44 percent

Moreover, as made clear from the table below, and its comparison of labor productivity growth in nonfarm businesses and in manufacturing as a whole during the same periods, however poor the durables’ performance, it’s still better than that of nonfarm businesses in an absolute sense. Nonetheless, its lead is down considerably.

                                                                         Non-farm business    manufacturing

1990s expansion (2Q 1991-1Q 2001):               +23.74 percent       +45.86 percent

bubble expansion (4Q 2001-4Q 2007):             +16.59 percent       +30.23 percent

current expansion (2Q 09 thru final 2Q 19):     +12.85 percent         +9.00 percent

current expansion (2Q 09 thru prelim 3Q 19):  +12.77 percent         +8.97 percent

Today’s productivity read was the first of three to be released for the third quarter (additional revisions will be made down the road), so it’s possible that the overall labor productivity result will wind up being an upturn rather than a downturn.  But for now, any talk of a new U.S. productivity growth revival looks premature. 

(What’s Left of) Our Economy: New Fed Figures Show U.S. Manufacturing Blowing Past Hurricane Setbacks

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automotive, chemicals, Federal Reserve, Great Recession, hurricanes, industrial production, inflation-adjusted growth, manufacturing, nondurable goods, petroleum refining, recovery, {What's Left of) Our Economy

The Federal Reserve’s new industrial production figures for October (released last Thursday) illustrated the perils of measuring economic performance month-by-month – especially where hurricanes and other individual shocks are concerned. For most of the industries hit hardest by the recent storms staged strong and even record sequential production bouncebacks in October.

At the same time, the data also make clear that the strong output momentum exhibited by America’s domestic manufacturing before the hurricanes continued even as they undercut sectors highly concentrated on the Texas and Louisiana Gulf coasts; and that this strength extended into October.

The month’s strong (1.29 percent) monthly inflation-adjusted production gain, combined with upward revisions, lifted manufacturing out of its latest output recession. And the October year-on-year in real output increase (2.73 percent) was industry’s best July, 2012’s three percent. The technical recession into which the automotive sector has fallen continued into its fifteenth month in October, but even here some good news emerged, as constant dollar output rose for the fourth straight month – the best such stretch since last May through October.

Overall, manufacturing’s strong recent after-inflation output performance has brought the sector to within 2.56 percent of the production levels it reached just before the last recession struck – nearly ten years ago, at the end of 2007.

Here are the manufacturing highlights of the Federal Reserve’s October industrial production report: 

>American domestic manufacturers overcame their hurricane-related losses and then some in October, according to new Federal Reserve industrial production data that show month-on-month real output gains and revisions strong enough to life the entire sector out of its latest technical recession.

>After-inflation production rose by 1.29 percent on month in October, the Fed reported – the best such improvement since April’s 1.37 percent.

>Positive revisions buoyed manufacturing as well. September’s constant dollar production – which was initially reported to have advanced by 0.10 percent sequentially despite the hurricanes – is now estimated as a 0.38 percent rise. August’s monthly real output decline was revised down again, from a 0.20 percent dip to 0.16 percent. And rather than decreasing by 0.35 percent in July, that month’s real manufacturing output is now judged to have flat-lined.

>Keying the October monthly real production surge in manufacturing were the sectors hit hardest by the recent hurricanes because they are heavily concentrated along the Texas and Louisiana coasts of the Gulf of Mexico, and especially because they rely on oil and natural gas as feedstocks.

>For example, price-adjusted production in organic chemicals cratered by a downwardly revised 14.92 percent on month in September. But in October, the sector’s after-inflation production skyrocketed by 28.05 percent – the biggest improvement on record (in this case, going back to 1986).

>Inflation-adjusted petroleum refinery output dropped sequentially in September by an upwardly revised 2.11 percent. October’s monthly 4.60 percent increase was the sector’s best since October, 2008’s 17.72 percent.

>In the huge chemicals sector in which many of these hurricane-impacted industries are located, constant dollar output in August and September is now reported to have dropped month-to-month by 2.57 percent and 2.22 percent – slightly better results that initially pegged, but still the worst since recessionary December, 2008’s 4.85 percent shrinkage. But October’s 5.82 percent sequential real production increase was its best monthly figure on record (in this case, going back to 1972).

>And in the non-durable goods sector in which chemicals are found, two sizable monthly production fall-offs in August and September were followed by a 2.33 percent sequential spurt in output in October – its best such performance since January, 1983.

>Nonetheless, some hurricane-affected sectors continued to lag. In plastics materials and resins, September real output tumbled by 8.16 percent sequentially – its worst month since recessionary December, 2008 (11.72 percent).

>In October, however, inflation-adjusted production slipped by another 4.65 percent sequentially, making for the worst two-month drop (12.43 percent) since November and December, 2008 (23.31 percent).

>In the automotive sector, a technical recession (more than two straight quarters of cumulative real output decline) continued into its fifteenth month in October. Since July, 2016, inflation-adjusted production is off by 0.23 percent.

>But the industry, which led manufacturing’s overall early recovery comeback from its sharp recessionary downturn, has shown some signs of life in recent months.

>The October Fed figures showed that its constant-dollar output is now up for three straight months. That kind of improvement hasn’t been seen since the May-October period of 2016.

>Further, revisions have been positive, including a September upgrade all the way from 0.07 percent to 1.69 percent.

>October’s Fed figures still left domestic manufacturing considerably smaller than at the onset of the Great Recession – which began in December, 2007. But the October monthly figures plus the revisions produced major catch-up. Last month’s Fed industrial production report showed that real manufacturing output remained 4.26 percent lower than when the last recession broke out. The October report shows the gap has narrowed to 2.56 percent.

(What’s Left of) Our Economy: Yet Another Manufacturing Recession – Driven by Automotive

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automotive, durable goods, Federal Reserve, industrial production index, manufacturing, nondurable goods, recovery, technical recession, {What's Left of) Our Economy

The Federal Reserve’s new (May) industrial production data showed that the biggest monthly drop-off in real automotive production since the harsh winter of 2014 helped drag American manufacturing back into a new technical recession – as output is now down cumulatively for more than two straight quarters. The latest slump extended into both the durable goods and the non-durable goods super-sectors. Combined vehicle and parts production also experienced its first real year-on-year production decline since October, 2009 – early in the current economic recovery — with the former especially weak.

The poor May performance and largely negative revisions helped push overall manufacturing’s real output 4.63 percent below its peak prior to the onset of the Great Recession – in late 2007. That is, over the longer haul, this manufacturing slump still hasn’t ended.

Here are the manufacturing highlights of the Federal Reserve’s new release on May industrial production:

>The biggest monthly automotive decrease since January, 2014’s depressed levels helped drag sequential U.S. manufacturing output down in inflation-adjusted terms for the third time in the last four months in April. As a result, industry overall fell back into technical recession, as its cumulative output has declined since last July.

>May’s 0.39 on-month real production drop was led by a 4.16 percent plunge in the combined output of motor vehicles and parts. The automotive sector, which led domestic manufacturing out of its deep downturn after the previous recession, had not experienced as great a monthly contracton since a harsh winter helped produce a 6.47 percent falloff in January, 2014.

>In absolute terms, May’s constant dollar production was the lowest since June, 2015.

>As a result of the poor May performance, automotive production also fell year-on-year (by 1.42 percent) for the first time since October, 2009 – shortly after the Great Recession officially ended.

>The May monthly automotive production decrease stemmed mainly from a 7.25 percent nosedive in real vehicles output – the biggest such decline since the 10.41 percent plunge during that winter-affected January, 2014.

>In absolute terms, vehicle production sank to its lowest real level since February, 2015.

>Moreover, May vehicle production was down year-on-year (by 6.96 percent). That drop represented its first year-on-year decline since last November.

>Motor vehicle parts production fell on month in May, too, but only by 1.94 percent. That was its biggest such decrease, however, since August, 2015.

>For overall manufacturing, most revisions were negative. April’s initially reported 0.33 percent real production increase was downgraded to 0.22 percent, March’s downwardly revised 0.30 percent falloff was revised down further – to 0.39 percent – and February’s upgraded 0.09 percent after-inflation production dip is now judged to be only 0.03 percent.

>Year-on-year real manufacturing output grew in May – but just barely (0.01 percent). That was the worst such figure since December, 2015’s 0.17 percent annual decline. Between May, 2014 and May, 2015, constant dollar manufacturing output improved by 1.21 percent.

>The May manufacturing figures along with the negative revisions pushed the sector’s overall output to 4.63 percent below its levels when the last recession officially began – more than eight years ago, in December, 2007. By this measure, the Great Recession has still not ended for domestic manufacturing.

>The weak automotive numbers, along with large monthly declines in machinery and furniture, contributed to a 0.69 percent monthly decrease in real durable goods production.

>More encouragingly, April’s monthly after-inflation durable goods production was revised up from 0.60 percent to 0.74 percent, the best such performance since last July.

>Nonetheless, the super-sector’s year-on-year real output went negative (by 0.25 percent) for the first time since last December. Between the previous two Mays, inflation-adjusted durable goods production rose by 0.51 percent.

>Price-adjusted durable goods production is still below that of last July. Therefore, it, too, remains mired in a span of cumulative contraction long enough (ten months) to qualify as a technical recession.

>Further, during the more than eight years since the last recession ended, real durable goods output has grown by only 0.22 percent.

>The non-durable goods sector in May returned to its recent trend of outperforming durable goods. Its sequential constant dollar production fell by a mere 0.02 percent.

>At the same time, April’s fractional monthly real output advance in durable goods production was revised down to a sizable 0.41 percent decrease.

>These results plunged this super-sector into recession, too, as cumulative output is now down since last August. This technical downturn is the second for non-durable goods in the last two-and-one-half years.

>Non-durable goods’ real output was up annually in May – by 0.34 percent. But that’s much slower than the 2.05 percent real growth between May, 2014 and May, 2015.

(What’s Left of) Our Economy: Manufacturing Has Ended its Technical Recession but Longer Term Growth Keeps Faltering

Tags

durable goods, Federal Reserve, industrial production, manufacturing, nondurable goods, recession, {What's Left of) Our Economy

Today’s Federal Reserve’s industrial production release showed that American manufacturing in July ended a seven-month stretch of cumulative inflation-adjusted shrinkage that represented its worst downtown since the partial recession year 2009. Yet the good monthly increase was fueled almost entirely by the automotive subsector’s second straight strong summertime production surge – whose momentum quickly petered out last year. Moreover, on a year-on-year basis, real production in manufacturing, including in both durable and non-durable goods, is growing at its slowest rate in months, and industry overall has still not regained the production levels it hit just before the last recession began – more than seven years ago.

Here are the manufacturing highlights of the Federal Reserve’s new release on July industrial production:

>According to the Fed, constant dollar manufacturing production rose in July on month by 0.85 percent. This best showing since last November was led by a second straight sequential July surge in automotive manufacturing.

>The July increase pulled the overall manufacturing sector out of its longest and worst downturn since recessionary 2009.

>Real output of vehicles and parts jumped 10.56 percent on month in July – even faster than last July’s 6.97 percent. This increase followed a 4.35 percent July monthly automotive output drop that was that sub-sector’s biggest since last August.

>Without the automotive boost, manufacturing output would still be in technical recession, with its cumulative inflation-adjusted production down since last November.

>Revisions to previous Fed manufacturing production readings were mixed but small. The prior June 0.05 percent after-inflation monthly increase was revised down to a 0.30 decline, and May’s 0.13 percent advance is now judged to have been only 0.09 percent. But April’s 0.33 percent gain was revised up to 0.36 percent.

>On a year-on-year basis, manufacturing’s July real output improvement of 1.76 percent beat June’s 1.72 percent. But the latter figure was revised down from 1.94 percent, and both numbers are by far the lowest since February 2014’s 0.85 percent (depressed by another harsh winter).

>Manufacturing’s July year-on-year constant dollar production increase was also much smaller than 2013-2014’s 4.55 percent jump but much bigger than 2012-2013’s near flatline.

>The monthly automotive jump helped real durable goods production grow by 1.25 percent in July, its best performance since August, 2013’s 1.80 percent. In July, real durable goods output fell by 0.37 percent.

>Nonetheless, the year-on-year durable goods numbers continued to worsen in July. Last month’s annual output gain of 1.48 percent nosed out June’s downwardly revised 1.43 percent. But as with industry overall, these increases were the worst since the winter of 2014 (in durable goods’ case, since January).

>Between July, 2013 and 2014, by contrast, constant dollar durable goods production soared by 7.25 percent – after dipping by 0.66 percent the previous year.

>Non-durables’ real output rose by 0.39 percent on a monthly basis in July, reversing two straight months of decline and their best showing since last November’s 1.08 percent.

>On a year-on-year basis, inflation-adjusted non-durable goods output climbed by 2.04 percent in July – the same as June’s downwardly revised number. Both are the worst such figures for this year and the lowest since last October. Nonetheless, the yearly July non-durable goods production improvement bettered 2013-2014’s 1.61 percent and 2012-2013’s 0.91 percent.

>Although manufacturing has grown strongly since its recessionary nosedive, as of July, its real output is still 1.67 percent lower than its level in December, 2007 – more than seven years ago, when the last recession began.

>Durable goods production is now up 3.31 percent in real terms since then, and non-durables output is 7.72 percent lower than at its pre-recession peak in July, 2007.

(What’s Left of) Our Economy: New Fed Figures Show Manufacturing Doldrums Continue

Tags

automotive, dumping, durable goods, Federal Reserve, industrial production, manufacturing, nondurable goods, recession, recovery, steel, {What's Left of) Our Economy

The latest Federal Reserve industrial production report showed that, after inflation, U.S. manufacturing output inched back up in March, but revisions for February and January kept its levels down below November’s figures. Although the automotive sector – a manufacturing leader for most of the current recovery – saw real production rise for the first time in four months, the sector remained in a technical recession, along with durable goods industries overall. Steel has emerged as another worry, with foreign dumping crippling its output, and overall, the manufacturing sector has grown by only 2.15 percent in inflation-adjusted terms since the last recession began.

Here are the manufacturing highlights of the Federal Reserve’s new release on March industrial production:

>This morning, the Federal Reserve reported that inflation-adjusted American manufacturing production in March posted its first monthly increase since December, but feeble growth and downward revisions left its output levels down on net since November (by 0.68 percent).

>Real manufacturing output advanced by 0.13 percent on month in March, and February’s 0.24 percent sequential drop was revised up to a 0.22 percent decrease. Yet January’s 0.27 percent decline was revised down to 0.59 percent.

>March’s small manufacturing rebound was led by the automotive sector, whose real production rose by 3.22 percent on a monthly basis – its first improvement since November. But February’s fall-off was revised down from three percent to 3.55 percent, and January’s decline was revised down for the second straight time, from 0.61 percent to 0.71 percent..

>Largely because of these figures, both the automotive industry and the durable goods sector saw their technical recessions continue. Inflation-adjusted production for both is now down on net since July.

>Overall manufacturing and durable goods output was also undermined the steel sector, which has recently been targeted by a massive foreign dumping campaign. Inflation-adjusted iron and steel output plunged 5.23 percent in March on a monthly basis, and is now down 12.36 percent year on year. In fact, real production in the sector is now down on net for more than five years – since February, 2010.

>The new March figures mean that inflation-adjusted overall U.S. manufacturing output is only 2.15 percent higher than it was when the Great Recession in December, 2007 – more than seven years ago.

>Non-durable goods production, long a manufacturing laggard, rose for the fifth straight month in March, though the increase (0.07 percent) trailed that for durable goods (0.17 percent).

>Sluggish March growth depressed manufacturing’s year-on-year gains from a downwardly revised 5.10 percent in January to 2.70 percent. Between March, 2013 and March, 2014, inflation-adjusted manufacturing output increased by 3.13 percent.

>Including the February data, durable goods output is now 8.92 percent greater in inflation-adjusted terms than at the December, 2007 start of the last recession.

>Real non-durable goods production is now 5.74 percent less after inflation than at its pre-recession peak, which was hit in July, 2007.

(What’s Left of) Our Economy: The Fed Reports a Manufacturing Renaissance — at Least for November

Tags

automotive, durable goods, Federal Reserve, industrial production index, Institute for Supply Management, ISM, manufacturing, manufacturing renaissance, nondurable goods, PMI, regional Feds, {What's Left of) Our Economy

The latest industrial production figures from the Federal Reserve showed that real U.S. manufacturing output rebounded strongly in November, powered by a surge of automotive production but also by broader-based gains.  In addition, upward revisions erased the slump previously recorded for the sector starting in late summer.  According to the new Fed report, inflation-adjusted nondurable goods production continued its recent pattern of outpacing durable goods advances, and the new results kept contrasting with those of surveys issued by the private sector, regional Fed banks — and the Fed itself.

Here are the manufacturing highlights of the Federal Reserve’s new release on November industrial production:

>This morning’s Fed data reported a preliminary 1.15 percent monthly surge in inflation-adjusted manufacturing output – the biggest monthly gain since February’s 1.34 percent snap back – and revisions erased what had been industry’s worst three-month real production performance since 2011.

>November’s increase was led by a 5.13 percent monthly automotive rebound that broke that sector’s worst growth performance since the peak of the financial crisis. Within automotive, after-inflation growth was spearheaded by a 9.32 percent jump in vehicle production, the best monthly rise since July’s 14.45 percent spurt. Parts production also rose for the first time in three months – by a healthy 1.28 percent.

>Even stripping out the automotive sector, real manufacturing output advanced by 0.85 percent in real terms in November – more than October’s 0.49 percent and the best performance by this indicator since March.

>Strong revisions brightened the manufacturing picture, too. October’s real monthly growth was revised from a weak 0.19 percent to a solid 0.45 percent. September’s figure was revised up from 0.21 percent to 0.37 percent. (It was initially pegged at 0.47 percent.) August’s 0.42 percent real production drop – the first monthly decrease since January – was revised to -0.37 percent. (It was initially pegged at -0.46 percent.)

>November’s strong inflation-adjusted output pushed manufacturing’s year-on-year real growth to 5.05 percent – much stronger than the comparable 3.04 percent 2012-2013 figure and the sector’s best since July’s 5.26 percent.

>Continuing a recent pattern, despite the automotive sector’s outsized growth, monthly expansion in the real nondurable goods sector (1.16 percent) outpaced growth in durable goods in November (1.14 percent).

>Nonetheless, durable goods production after inflation is still increasing much faster year-on-year (5.74 percent) than nondurable goods output (4.35 percent), though the gap between the two continues to narrow.

>On an inflation-adjusted basis, U.S. manufacturing output is now 3.10 percent higher than its pre-recession high. Real durable goods production has grown by 10.46 percent since then, but the non-durables sector is still 5.38 percent smaller than at its pre-recession zenith, which was hit in July, 2007.

>The November manufacturing output figures also show that these Federal Reserve data continue to diverge in important ways from the results of widely followed surveys conducted by the private sector and regional Federal Reserve banks.

>For example, the November manufacturing production figures from the Institute for Supply Management showed a slight slowdown in real manufacturing output, not the acceleration reported this morning by the Federal Reserve.

>Markit.com’s November Purchasing Managers’ Index reported “the weakest pace of [production] expansion since January.”

>The new Federal Reserve manufacturing production numbers do match up well with the monthly November output boom reported by the Philadelphia Federal Reserve Bank. But the other regional Fed manufacturing results for November were more subdued.

>Also interesting: No major pick up in November manufacturing output was reported in the Federal Reserve’s own Beige Book, either. Its assessment simply observed that “Manufacturing activity generally advanced during the reporting period.”

 

(What’s Left of) Our Economy: Weak Internals in the New Industrial Production Report

Tags

automotive, durable goods, Federal Reserve, industrial production, manufacturing, nondurable goods, {What's Left of) Our Economy

The new Federal Reserve industrial data revealed that real U.S manufacturing production bounced back in September from its first monthly decrease since January, but downward revisions for prior months showed that growth has been sluggish since May. In addition, the heretofore booming automotive industry experienced its first consecutive monthly inflation-adjusted production drops since November and December, 2010. Further, if automotive is stripped out, real manufacturing output is now down since the previous recession began in December, 2007.

Here are the manufacturing highlights of the Federal Reserve’s new release on September industrial production:

>This morning’s data reported that domestic manufacturing’s monthly output after inflation recovered from a downwardly revised 0.46 drop (its first since January) to a 0.47 percent increase.

>Yet downward revisions in May, June, July, September, and August, reduced domestic industry’s real output since May to a negligible 1.14 percent. Since July, this output is up only 0.32 percent.

>In addition, September’s increase combined with these revisions have left total inflation-adjusted manufacturing production just 1.31 percent higher than the level it hit when the last recession broke out, in December, 2007.

>So far, much of manufacturing’s recovery since the mid-2009 end of the recession has been led by a torrid automotive sector. Yet in September, after-inflation output of vehicles and parts makers dropped for the second straight month – its first such back-to-back decrease since November and December, 2010.

>Without the automotive sector, moreover, real manufacturing output since the recession’s onset is now down 1.42 percent.

>Further, according to the September figures, manufacturing’s year-on-year growth has now slowed since July, though it remains above even figures in the spring, following the sector’s recovery from harsh winter weather.

>September’s monthly manufacturing output gain followed an August drop revised down from 0.40 percent to 0.46 percent, a July drop revised from 0.82 percent to 0.84 percent, a June gain revised from 0.33 percent to 0.31 percent, and a May increase revised from 0.44 percent to 0.39 percent.

>Year on year, September real manufacturing production was up 4.11 percent. August’s initial 4.02 percent year-on-year gain was revised down to 3.87 percent, and July’s was revised down from 5.19 percent to 5.02 percent. The May and June figures remained roughly unchanged.

>The September figures did continue a string of 2013-14 monthly year-on-year real manufacturing output increases that have exceeded their 2012-13 counterparts. From September, 20123 to September, 2013, inflation-adjusted manufacturing production rose only 3.10 percent, and the comparable figure for August was only 1.83 percent.

>September’s monthly real automotive production decline of 1.40 percent followed a 6.93 percent August nosedive that was revised up from 7.63 percent. July’s big jump was revised up from 9.25 percent to 9.39 percent.

>September year-on-year real automotive output’s increase of 5.70 percent is down significantly from the 8.96 percent rate in August, the 21.63 percent gain in July, the 7.52 percent rise in June, and the 8.79 percent improvement in May.

>The longstanding gap between the fortunes of America’s durable and nondurable goods manufacturers remained substantial as of September, but the nondurables sector continued a recent trend of catching up.

>September real durable goods production rose 0.45 percent on month after the automotive sector led it to a 0.96 percent drop. On a year-on-year basis, inflation-adjusted durables output kept slowing gradually – from 5.80 percent in May to 5.38 percent in September.

>Since the recession’s December, 2007 onset, durable goods production is up 8.69 percent in real terms.

>Nondurable goods production followed up its 0.13 percent monthly August gain after inflation with a 0.49 percent increase – higher than the rise for durables manufacturing. And whereas durables output has been slowing on a year-on-year basis, nondurables output has been quickening – from 1.57 percent in May to 2.68 percent in September.

>Since its pre-recession July, 2007 peak, nondurable manufacturing output is still down 7.16 percent in inflation-adjusted terms.