(What’s Left of) Our Economy: U.S. Manufacturing Remains Stuck in Pandemic Aftermath Mode

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CCP Virus, coronavirus, COVID 19, durable goods, global financial crisis, Great Recession, manufacturing, nondurable goods, recession, {What's Left of) Our Economy

‘Tis still the season – and it will continue for a while to be the season – for year-end 2022 economic data, and today we’ll examine the list of the production growth winners and losers in domestic manufacturing. The big takeaway is that U.S.-based industry’s output patterns are still being shaped by the fading but ongoing aftermath of the CCP Virus pandemic. The main evidence? The unusual  fluctuations in manufacturing ouput.

But before getting to the results from the twenty widest manufacturing categories tracked by the Federal Reserve, let’s review the even bigger picture results, which provide an indication of the dramatic ups and downs experienced recently by industry.

Manufacturing’s overall production last year dipped by 0.41 percent after adjusting for inflation (the measure most closely followed by students of the economy). So by the standard definitions (two straight quarters of contraction) the sector is in recession. Moreover, excepting the peak pandemic year of 2019-20, this latest annual output showing was U.S.-based manufacturers’ weakest since the 2.43 percent yearly drop in 2019.

At the same time, this decrease followed 2021’s 4.19 percent gain in constant dollar manufacturing production – the best such showing since the 6.48 percent registered in 2010, early during the recovery from the Great Recession triggered by the Global Financial Crisis of 2007-08.

Narrowing the focus slightly, production in the durable goods super-category climbed between 2021 and 2022 by 0.85 percent. But that relatively feeble expansion came right after the 4.79 percent price-adjusted growth the previous year – its best such performance since 2011’s 5.96 percent.

In nondurable goods,after-inflation production sank last year by 1.72 percent. But the previous year’s 3.58 percent expansion was the strongest since the 3.89 percent way back in 2004.

Big fluctuations can be seen in the statistics for the aforementioned “Big 20.” In the left-hand column below is how their constant dollar output grew or shrank last year in percentage terms, listed from best to worst. In the right-hand column are the counterpart numbers for 2021, in the same order.

1. aerospace & misc, transportation:  10.87    petroleum and coal products:   13.99

2. apparel and leather goods:              10.11   machinery:                                 11.98

3. nonmetallic mineral product:            5.69  computer & electronic product:  9.20 

4. automotive:                                       5.05 miscellaneous durable goods:      6.38

5. fabricated metal product:                  1.75  chemicals:                                   6.37

6. miscellaneous durable goods:           1.60  primary metals:                          5.87  

7. food, beverage and tobaco:                0.11  fabricated metal product:          5.84 

8. elec equip, appliances:                      -0.44 aerospace,misc transportation:  5.39

9. plastic and rubber products              -1.07 elec equip., appliances:              5.35

10.printing                                            -1.19 textiles & products:                   4.56

11. chemicals:                                       -2.01 furniture:                                   4.11

12. petroleum & coal products:            -2.33 apparel & leather goods:           4.11

13. primary metals:                               -2.83 printing:                                    3.26

14. machinery:                                      -2.89 plastics & rubber products:      1.99

15. computer & electronic product:      -2.91 paper:                                       0.90 

16. misc.nondurable goods:                 -3.56 wood product:                           0.13

17. furniture:                                        -5.19 nonmetallic mineral product:   -0.17  

18. wood product:                                -6.14 food, beverage & tobacco:       -0.35 

19. paper:                                             -8.23 automotive:                              -4.29    

20. textiles & products:                     -11.98 misc nondurable goods            -6.00

The weakness of 2022 comes through from noting that of these twenty industries, inflation-adjusted production fell in fully 13.  In 2021, such losers nubeed only five.

As for the fluctuations, in 2022, the after-inflation growth for five of the twenty were the worst since the Great Recession years of 2008 and 2009:  wood product, computer and electronic product, furniture, textiles and products, and paper. And for the latter two, that “worst since the Great Recession” description includes their results for the terrible peak pandemic year 2020. In 2021, no sectors achieved that dubious distinction.     

But in 2021, five sectors recorded their best annual price-adjusted production increases since 2010 – the first full year of recovery after the Great Recession:  primary metal, fabricated metal product, machinery, computer and electronic product, and electrical equipment and appliances.   

From the perspective of today, domestic manufacturing looks like it’s been on a roller-coaster, with 2021 being a sizable leg up followed by a small leg down last year. The big question facing U.S.-based manufacturing (assuming no more pandemics or new conflicts breaking out in Europe or Asia or or other black swan events) is how deep a dive that leg down will become if the broader economy slows meaningfully or falls into a new recession – as domestic industry already has.     

                                                       

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(What’s Left of) Our Economy: Still More Evidence of Weakening U.S. Manufacturing

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capacity utilization, durable goods, manufacturing, nondurable goods, {What's Left of) Our Economy

On top of lousy new job and output results, we can now make it a discouraging trifecta for U.S. domestic manufacturing: The new output figures released by the Federal Reserve Wednesday also show that capacity utilization keeps falling, too.

This is a statistic I haven’t followed for a while, but many students of the economy see capacity utilzation as a key barometer of industry’s health, and when you consider the definition, it’s easy to see why. Capacity utilization measures the share of the nation’s factory equipment that’s actually in use, and not sitting idle. So it says lots about what kind of demand manufacturers are seeing for their goods.

Therefore, it can’t possibly be good news that for manufacturing overall, capacity utilization fell to 77.53 percent – the lowest such figure since September, 2021’s 77.14 percent.

Moreover, capacity utilization is down from its post-pandemic peak of 80.10 percent last April. And it’s back below its historic average between 1972 and 2021 of 78.20 percent. Moreover, the monthly sequential drop of 1.39 percent was one of several recent manufacturing results that have hit their worst since the peak of the CCP Virus’ devastating first wave, in April, 2020. In that case, capacity utilization cratered by 15.31 percent sequentially.

As far as the super categories are concerned, utilization in durable goods was down monthly in December by 1.21percent to 76.10 percent – also the lowest figure since September, 2021 (which was 74.84 percent). In addition, this gauge of durable goods activity has dropped by 3.32 percent since last peaking (also in April) at 78.72 percent

Non-durable goods’ capacity utilization rate in December rate was higher in absolute terms (79.20 percent) than that for either manufacturing generally or durable goods. But it tumbled from November’s read by a steeper 1.58 percent. Since its peak last March, it’s decreased by 3.27 percent.

These December results are still preliminary. And optimists can note that capacity utilization in all three categories is still slightly higher than in February, 2020, the last full data month before the pandemic’s arrival in the United States in force.

But the recent trend is unmistakably gloomy, and entirely consistent with the likelihood that, like the entire economy, domestic manufacturing is in for some tough sledding over the next few months.

(What’s Left of) Our Economy: 2022’s U.S. Manufacturing Employment Winners and Losers

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automotive, durable goods, Employment, Federal Reserve, inflation, Jobs, manufacturing, nondurable goods, nonfarm jobs, private sector, recession, soft landing, {What's Left of) Our Economy

The release last Friday of the December official U.S. jobs report enables students of the economy to examine developments over the last full year, and that includes the biggest employment winners and losers in domestic manufacturing.  (Here‘s my analysis on the latest monthly manufacturing jobs data.) 

Below are the results for the broadest manufacturing categories tracked by the government, along with the durable and nondurable goods super-categories, both in absolute terms and in relative (percentage) terms. Because its fortunes have so strongly influenced those of all domestic industry, the data for the narower automotive sector will be presented as well.

(As known by RealityChek regulars, the numbers for other narrower sectors of special importance since the CCP Virus arrived stateside in force, like certain medical equipment and pharmaceuticals and semiconductors, are always one month behind. So year-on-year changes for full year 2022 won’t be available until next month.)

As with all U.S. government data, the figures below will be revised several times more. But unless the upgrades and downgrades are enormous, the year will have been marked by several important trends and comparisons with the 2021 data. In particular:

>manufacturing employment from December, 2021 through December, 2022 grew by exactly the same percent (3.02) as employment in the non-farm economy as a whole – the government’s definition of the entire economy;

>between December, 2020 and December, 2021, manufacturing job creation trailed hiring in the non-farm economy by 4.73 percent to 2.99 percent;

>between December, 2021 and December, 2022, head counts in the private sector as a whole expanded by 3.31 percent – also faster than manufacturing’s pace – but that result represented a smaller margin versus manufacturing than in 2021, when private sector payrolls expanded by 5.21 percent;

>in 2022, payrolls increased faster in durable goods (3.29 percent) than in nondurable goods (2.57 percent);

>in 2021, the durable goods edge was a smaller 3.11 percent versus 2.80 percent; 

>on a percentage basis, 2022 manufacturing job growth was broad-based. Of the 20 broad industry groupings tracked by the federal government, 15 generated additional hires and ten boosted their workforces by between two and four percent; and

>2021’s manufacturing employment increases were even broader based, however, as only the petroleum and coal products sector cut jobs.  But the spread among sectors was greater, as only eight fell into the two-four percent growth range.   

And now, the absolute yearly changes in manufacturing employment in 2022 and 2021, with the former listed in order from best performance to worst:

                                                                       2022                    2021

manufacturing total                                     379,000               365,000

durable goods                                              257,000               236,000

nondurable goods                                        122,000               129,000

transportation equipment                               90,800                 50,400

food manufacturing                                       59,100                  29,200

fabricated metal products                              43,900                  46,000

machinery                                                      41,000                  27,500

chemicals                                                       31,000                  26,300

computer & electronics products                   30,200                  14,600

miscellaneous nondurable goods                   18,400                  40,300

plastics & rubber products                             16,700                  20,100

miscellaneous durable goods                         15,600                  31,700

wood products                                                12,000                  16,900

non-metallic mineral products                       14,200                    3,300

primary metals                                                 9,900                  11,600

electrical equipment & appliances                   7,500                 17,500

paper & paper products                                    5,200                      800

printing & related support activities                   300                   7,000

apparel                                                               -300                   2,100

petroleum & coal products                             -1,600                  -4,400

textile mills                                                     -3,400                   3,900

textile product mills                                        -3,500                   4,000

furniture & related products                            -8,000                15,600

20-21 absolute changes

And here are those percentage changes, with the 2022 results again listed from best performance to worst:

                                                                           2022                   2021

manufacturing total                                            3.02                    2.99

durable goods                                                     3.29                    3.11

nondurable goods                                               2.57                    2.80

transportation equipment                                   5.43                     3.11

miscellaneous nondurable goods                       5.42                  13.46

machinery                                                          3.84                    2.64

food manufacturing                                           3.56 `                  1.79

chemicals                                                           3.53                    3.09

non-metallic mineral products                           3.48                    0.81

fabricated metal products                                   3.11                   3.37

wood products                                                    2.87                   4.21

computer & electronics products                       2.83                   1.39

primary metals                                                   2.78                   3.36

miscellaneous durable goods                             2.49                   5.33

plastics & rubber products                                 2.21                   2.82

electrical equipment & appliances                     1.86                   4.55

paper & paper products                                      1.48                   0.23

printing & related support activities                   0.08                   1.91

apparel                                                               -0.32                   2.28

petroleum & coal products                                -1.52                  -4.01

furniture & related products                              -2.09                   4.24

textile product mills                                           -3.32                   3.94

textile mills                                                        -3.39                   4.05

As for the automotive sector, which is placed within the broader transportation equipment category, it added 54,200 workers in 2022, a 5.50 percent advance. So among the above industries, on a percentage basis, it takes the job creation crown for industry during the past year.  Vehicle and parts makers enjoyed a strong 2021 employment-wise, too, enlarging their workforce by 4.05 percent, or 38,300.

A final noteworthy point: Manufacturing’s hiring performance doesn’t seem to have been strongly related to its production growth. In 2021, when industry’s payrolls expanded by 2.99 percent, its inflation adjusted output rose by 4.19 percent. But last year, when manufacturers upped their headcounts by 3.02 percent, their real production annual growth (through November – the lastest data available) slowed to 1.40 percent.

This year, the economy could well tip into recession, or perhaps at best achieve the “soft landing” sought by the Federal Reserve in its fight against inflation. In other words, U.S.-based manufacturers could well face a new test of the growth and hiring resilience they’ve shown so far since the pandemic’s arrival.            

(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

Tags

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

Tags

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

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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

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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

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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.”