(What’s Left of) Our Economy: U.S. Manufacturing Dispels Recession Fears

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aircraft, aircraft parts, apparel, automotive, CCP Virus, computer and electronics products, coronavirus, Federal Reserve, inflation-adjusted growth, machinery, manufacturing, medical equipment, miscellaneous durable goods, non-metallic mineral products, paper, personal protective equipment, petroleum and coal products, pharmaceuticals, PPE, printing, recession, semiconductors, Wuhan virus, {What's Left of) Our Economy

If the U.S. economy is still in recession, or getting uncomfortably close to one, it seems no one’s told the nation’s manufacturers. Yesterday’s latest figures from the Federal Reserve show that domestic industry expanded its inflation-adjusted output by 0.43 percent on month in September. Moreover, revisions at this 30,000-foot level were modestly positive (as opposed to some for manufacturing sectors which, as you’ll see, were pretty dramatic).

August’s initially reported gain of just 0.09 percent – which seemed to indicate that the sector was heading into a downturn – is now judged to have been one of 0.38 percent. July’s originally reported 0.72 percent advance was revised down slightly again – from 0.62 percent to 0.60 percent. And June’s results were downgraded a third straight time – from an initially reported dip of 0 05 percent to a drop of 0.58 percent.

These new and revised figures pushed real U.S. manufacturing production is up 4.19 percent from 2020 – just before the CCP Virus and assorted mandated and voluntary behavioral curbs sparked a short but scary downturn and touched off waves of distortion that persist to this day. As of last month’s Fed report, industry’s inflation-adjusted production had risen by 3.49 percent during the pandemic period.

Among the broadest manufacturing sub-sectors tracked by the Fed, the biggest September winners in terms of after-inflation output were:

>apparel and leather goods, whose monthly constant dollar output jumped 1.56 percent. Revisions, moreover were strongly positive. August’s initially reported 0.53 percent downturn was lowered to a slump of 1.85 percent. But July’s results rebounded from a 1.46 percent gain to one of 1.66 percent, after having been revised down from 1.60 percent.

And get a load of the June figures! The initially reported 1.44 percent drop was revised to a boom of 6.09 percent (which would have been the best such increase since August, 2020’s 8.04 percent), then back down to a rise of just 1.46 percent, and finally (for now) back up to a 5.98 percent advance.

Apparel and leather goods’ real output is now 5.39 percent higher than in immediately pre-pandemic-y February, 2020, versus the 4.98 percent calculable last month;

>non-metallic mineral products, where inflation-adjusted production was up 1.41 percent for these companies’ best month since May’s 1.69 percent. Revisions, though, were moderately negative, with August’s initially reported 0.09 percent monthly dip being downgraded to a drop of -0.22 percent; July’s initially reported 0.52 percent increase revised down to a slip of 0.09 percent to a fractional decline; and June’s initially reported 1.07 percent fall-off significantly upgraded to a 0.48 percent increase, then revised down to growth of 0.46 percent, to a fractional decrease.

Still, price-adjusted output in non-metallic mineral products is now 1.48 percent higher than just before the CCP Virus arrived in force, versus the 0.12 percent calculable last month;

>petroleum and coal products, which grew inflation-adjusted output by 1.13 percent in September, and which saw overall positive revisions. August’s initially reported 3.54 percent is now judged to be an advance of 4.13 percent (the strongest since March, 2021’s 11.49 percent). July’s initially estimated 0.94 percent decrease has now been upgraded first to one of 0.25 percent and now to one of 0.23 percent. And June’s results stayed at a significantly downgraded 2.80 percent tumble.

Real output in these sectors is now 3.20 percent higher than in February, 2020, versus the 1.45 percent calculable last month; and

>computer and electronics products, whose constant-dollar production climbed 1.07 percent – now the best growth since February’s 1.20 percent. Yet revisions were negative, as August’s initially reported increase of 1.27 percent (which had been the best since May, 2021’s 2.44 percent) has been downgraded to one of 1.05 percent; July’s initially reported drop of 0.65 percent downgraded to one of 0.68 percent and now to one of 0.89 percent; and June’s results settling in at a 0.45 percent increase after the initially reported 0.21 rise was upgraded to 0.67 percent and then revised down to 0.46 percent.

After inflation production in these industries is now 6.78 percent higher than in that last pre-CCP virus data month of February, 2020 versus the 6.11 percent calculable last month.

September’s biggest price-adjusted growth losers were:

>printing and related support activities, where real output sank by 1.67 percent – its worst such perfomance since January’s 2.09 percent retreat. Just as bad, revisions were negative on net. August’s initially reported 0.27 percent decrease was revised up all the way to a 0.59 percent gain, but July’s loss is now judged to have been 1.60 percent after having been upgraded from on of 1.67 percent to one of 1.50 percent. And June’s initially reported 1.68 increase (then the best such performance since February’s 3.13 percent advance) has been revised since to a decrease of 0.51 percent, 0.40 percent, and 0.41 percent.

Conseqently, this hard-hit sector’s output is 11.81 percent smaller than in February, 2020, versus the 11.02 calculable last month.

>miscellaneous durable goods, the broad category that includes the personal protective equipment and other medical devices used so widely to fight the CCP Virus. Its inflation-adjusted production fell by 1.29 percent in September – the first decrease since March’s fractional dip. Even better, this decline comes off overall positive revisions of already excellent results.

August’s initially reported 1.71 percent increase is now estimated to have been one of 2.86 percent the – best since growth rate since July, 2020’s 5.96 percent, as the economy recovered from the pandemic’s first wave and medical equipment production was prioritiezed. July’s initially reported 1.23 percent improvement was downgraded to one of 0.89 percent and then back up to 0.95 percent, and June’s initially reported 2.25 percent growth stayed at a downwardly revised 0.67 percent following a downgrade to 0.87 percent.

Still, in constant dollar terms, production in this broad category is now 13.78 percent greater than in immediately pre-pandemic-y February, 2020, versus the 13.92 percent calculable last month; and

>paper, where real output in September sank by 0.92 percent. Revisions were mixed, with August’s initially reported 0.80 percent increase (the best such performance since February’s 2.26 percent jump) revised down to 0.69 percent; July’s initially reported 0.64 percent decrease upgraded for a second time, to one of 0.58 percent and now to 0.51 percent; and June’s numbers following a similar pattern, with an initially reported shrinkage of 0.88 percent revised up to losses of 0.62 percent and 0.57 percent, respectively.

Yet paper’s real output is now down by 3.78 percent since just before the pandemic arrived, versus the 2.83 percent worse calculable last month.

Good Septembers were also recorded in two manufacturing sectors of long-time special importance to the economy.

Machinery’s economic role is critical because of how widely its products are used throughout the economy and because its output largely reflects business’ expectations of future demand and growth. So it was good news that this diverse sector’s constant dollar output rose by 0.32 percent in Sept, and that revisions were positive on net.

August’s initially reported 0.99 percent increase (mistakenly reported in my last post as 0.91 percent), which had been the best such growth since April’s 1.97 percent was upgraded all the way up to 2.64 percent! That’s now the best production month since July, 2021’s 2.76 percent. This July’s initially reported 0.50 percent growth was upgraded again – from 0.68 percent to 0.78 percent – but June’s data has been revised down overall from a drop of 1.49 pecent to one of 1.27 percent, and back down to 1.75 percent and 1.83 percent.

These developments have now pushed up machinery’s post-February, 2020 real output to 7.23 percent, versus the 5.07 percent calculable last month.

The automotive sector has greatly influenced the manufacturing production statistics throughout the pandemic era, and its volatility continued in September, with after-inflation output up by one percent. Yet that result followed an August whose production decrease was revised down from 1.44 percent to one of 1.48 percent; a July whose output increase was downgraded from an initially reported 6.60 percent to one of 3.24 percent and now back up to 3.57 percent; and a June whose results have changed from -1.49 percent to -1.27 percent to -1.31 percent to -1.84 percent.

Real vehicle and parts production, however, is now back in the black since February, 2020, now aving risen by 0.89 percent, versus the 0.89 percent slippage calculable last month.

The news also was generally good in September for industries prominent in the news during the CCP Virus era.

Constant-dollar production in the shortage-plagued semiconductor sector rose by 0.45 percent, and revisions overall were mixed. August’s initially reported decline of 0.57 percent (the first in three months) is now judged to have been only 0.39 percent. July’s initially reported 1.16 percent growth has been revised down to 0.77 percent and now a measly 0.02 percent. But June’s initially reported 0.18 percent advance is now judged to have been one of 0.86 percent, after being revised way up to 2.09 percent, and then back down to 0.88 percent.

Real semiconductor production is now 17.29 percent higher since February, 2020, versus the 17.46 percent improvement calculable last month.

Inflation-adjusted production of aircraft and parts grew 0.59 percent in September, and revisions were mixed. August’s initially reported 3.11 percent surge (the best since January, 2021’s 8.61 percent) was downgraded significantly to 1.69 percent. But July’s numbers have been upgraded from an initially reported gain of 1.02 percent to one of 1.52 percent and now to one of 1.90 percent. And June’s initially reported 0.26 percent growth has been revised to a 0.18 percent advance, back up to a rise of 0.24 percent, and again to one of 0.56 percent.

Aircraft and parts production, therefore, has now increased by 31.18 percent since just before the pandemic’s arrival, versus the 30.60 percent rise calculable last month.

Pharmaceutical and medicines companies boosted their real monthly production by 0.64 percent in September, and revisions were mixed. August’s initially reported 1.62 percent improvement (the best since August, 2021’s 1.96 percent) was upgraded to 1.81 percent. But July’s initially reported 0.29 percent increase, which had been revised up to 0.30 percent, is now judged to have been a 0.55 percent loss – the first such setback since February’s 1.35 percent fall). And June’s results have gone from 0.39 percent to unrevised to a gain of 0.32 percent and now a rise of 0.43 percent.

As of last month, phamaceuticals’ and medicines’ after-inflation production level had grown by 16.56 percent since February, 2020.  Now the figure is 16.58 percent.

The lone exception to these good September results was medical equipment and supplies – where the personal protective devices and other pandemic fighting equipment is found. Its 1.33 percent after-inflation production fall-off last month was its first since last December (0.71 percent) and the worst such performance since the 15.08 percent crash dive in April, 2020 – at the height of the CCP Virus’ devastating first wave.

But August’s initially reported three percent increase was revised up to 4.40 percent – the best such result since July, 2020’s 9.84 percent. This July’s initially reported 1.90 percent rise was downgraded to 1.58 percent but then upgraded to 1.69 percent. And although June’s figure was revised down from an initially reported 3.12 percent to 1.01 percent and then to 0.67 percent, it was nudged back up to 0.68 percent yesterday.

These net gains pushed medical equipment and supplies’ real production to 17.95 percent above their February, 2020 levels, versus the 17.81 percent improvement calculable last month.

For what it’s worth, the normally pretty reliable forecasters at the Atlanta branch of the Federal Reserve system believe that the economy has now exited the recession it experienced in the first half of this year, and that will grow at a very respectable 2.9 percent after inflation at annual rates in the third quarter of this year. We’ll find out for sure starting October 27, when the first official read on third quarter growth comes out. But at this point, these new manufacturing production data support the idea that economic expansion is back for the time being – and certainly augur well for domestic industry’s prospects at least for the short term.

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(What’s Left of) Our Economy: Slower Growth and More Hiring in U.S. Manufacturing, Too

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aerospace, aircraft, aircraft engines, aircraft parts, CCP Virus, chemicals, coronavirus, COVID 19, electronics products, Employment, fabricated metal products, furniture, Jobs, machinery, manufacturing, medicines, miscellaneous durable goods, non-farm jobs, non-farm payrolls, paper, paper and paper products, pharmaceuticals, recession, semiconductors, surgical equipment, textiles, vaccines, {What's Left of) Our Economy

When it comes both to the U.S. economy in general and domestic manufacturing in particular, this morning’s official jobs report (for July) strongly supported a widely held supposition of economists – that employment is a lagging indicator of trouble.

That’s because laying off workers supposedly is seen as a last resort by businesses facing bad times, and the new results for non-farm payrolls (the U.S. government’s definition of the national jobs universe) seems to have validated this view in spades. Even though the economic growth has been slowing dramatically from last year’s rapid pace, employers boosted their headcounts by a stunning 528,000 last month (including 471,000 in the private sector). And even though inflation-adjusted American manufacturing production has fallen for the last two data months (May and June – the July results will come out August 16), U.S.-based industry added workers for the fifteenth straight month.

Indeed, July’s 30,000 increase in manufacturing jobs was the biggest monthly gain since April’s 61,000. And the numbers included the best hiring month of all time (or at least since that data series began in 1990) for the big pharmaceuticals and medicines industry. Moreover, revisions left the solid results of June and May virtually unchanged.

As a result, domestic manufacturing employment is 0.32 percent higher than its level in February, 2020 – just before the CCP Virus struck the U.S. economy in force and sent economic activity spiraling downward. Last month, when it finally regained its pre-pandemic jobs levels, the net gain was 0.09 percent.

Since July’s overall jobs improvement was so great, manufacturing is no longer the economy’s post-pandemic employment champion. That title has passed again to the total private sector, where payrolls are now 0.49 percent higher than in February, 2020. But manufacturing’s net job creation pace continues to exceed that of the non-farm economy (which includes the public sector). Its workforce is just 0.02 percent larger than just before the pandemic’s arrival.

The huge July surge in non-farm and private sector net hiring did depress manufacturing’s share of those workforces – from 9.86 percent of private sector jobs to 9.85 percent, and from 8.42 percent of non-farm jobs to 8.41 percent. But manufacturing employment is still up in relative terms since February, 2020 – climbing from 9.83 percent of private sector employment and 8.38 percent of non-farm employment.

Job-creation winners abounded throughout manufacturing’s major sectors in July, with the standouts being:

>fabricated metals products, where payrolls grew by 4,200. Revisions, however, continued to be weak, with June’s sequential loss remaining at 600; May’s originally reported 7,100 surge revised lower first to 6,900 and now to 6,600 (still the best since February’s 9,300 pop); and April’s results staying at a twice downgraded 1,400. Employment in this big sector is now 2.04 percent below its immediate pre-pandemic levels, versus the 2.31 percent shortfall calculable last month;

>miscellaneous durable goods (the major category containing many of the key medical devices used to combat the virus), which added 3,700 workers in its strongest monthly performance since last November’s 10,400. But revisions were on balance negative here, too, with June’s initially reported 2,400 job growth now judged to have been 1,700, May’s initially upgraded 1,300 advance downgraded to 1,000, and only April’s results breaking the pattern, with its upgraded 600 job loss staying unchanged.

Miscellaneous goods’ workforce is now 2.79 percent higher than in February, 2020, versus the 2.36 percent calculable last month;

>chemicals, which remained on a hot streak last month. Its companies added 3,700 employees on month in July, its June performance was revised way up from a 1,200 improvement to 4,500, its initially downgraded May rise upgraded to 5,100 (the greatest improvement since January’s 5,500), and April’s increase settling at 1,700 after being first reported as 1,000. As of July, 5.84 percent more workers were employed in the chemicals industry than in February, 2020, versus the 4.83 percent calculable last month; 

>machinery, which RealityChek regulars know is a bellwether for the rest of manufacturing and the whole economy because of how widely its products are used. Its employment increased by 3,400 on month in July; June’s initially reported 1,000 rise is now pegged as 1,600; May’s initially reported 3,200 job decrease has now ben revised all the way up to a jobs gain of 200; and April’s final total stayed at a twice downgraded 5,800. Consequently, machinery employment has rebounded to within 1.47 percent of its immediate pre-pandemic level, versus the 2.05 percent shortfall calculable last month; and 

>computer and electronics products, which contains shortage-plagued semiconductor sector, also boosted its employment by 3,400 sequentially in July. June’s initially reported 2,300 net new job creation is now judged to have been 2,000, but May’s totals were revised up a second time, to 5,300 (its best monthly performance since the 6,300 recorded in May, 2020, during the economy’s strong bounceback from the first CCP virus wave), and April’s thrice upgraded figure remained the same at 4,900. This progress pushed headcounts in this sector 0.41 percent above their February, 2020 levels, versus the 0.11 percent calculable last month.

The worst performers among July’s few maufacturing losers:

>paper and paper products, where employment fell month-to-month by 1,200. At the same time, June’s initially reported 1,200 job increase was upgraded to 1,500; May’s advance was revised down but still remained at an increase of 700; and April’s initially downwardly revised 1,300 employment rise stayed at an upwardly revised 2,100 increase. Nonetheless, there are now 0.86 percent fewer jobs in paper and paper products compared with February, 2020, versus the 0.22 percent dip calculable last month;

>textile mills, whose July employment was off by 600. Revisions were mixed, with June’s initially reported jobs bump of 700 now judged to have been 300, but May’s initially reported payroll decrease of 700 now upgraded to a loss of 400, and April’s upgraded 800-job increase remaining the same. Since just before the pandemic arrived,, however, textile mill jobs have shrunk by 6.18 percent, versus the 5.15 percent calculable last month; and

>furniture and related products, where headcounts sank by 600 on month. Worse, revisions on balance were decidedly negative. June’s initially reported employment improvement of 100 is now considered to be a drop of 1,100; May’s results, first reported as a 1,000 jump, were downgraded a second time to a mere 100 advance; and April’s initially reported 1,100 drop have been revised up only to 900 job loss. Whereas as of last month, the furniture complex’s workforce had risen to 0.60 higher than its February, 2020 level, it’s now sunk back to 0.03 percent lower.

As always, the most detailed employment data for pandemic-related industries are one month behind those in the broader categories, and most turned in performances even better than manufacturing as a whole.

The semiconductor industry is still struggling with the aforementioned shortages that are hampering so many other parts of the economy. But the 1,700 jobs it added on month in June were the most since the 1,800 in January, 2019, and revisions were positive. May’s initially reported 800 jobs gain is now pegged as having been 1,000 and April’s first reported 100 increase has been upgraded more than ten-fold – to 1,100.

The upshot seems to be that the recent high profile announcements of new domestic microchip fab construction are showing up in the employment data. As of last month, the sector’s payrolls were only 2.20 percent higher than just before the pandemic’s large-scale onset (though in fairness, semiconductor employment actually rose during the steep 2020 downturn). As of today, however, employment is up 3.22 percent during that period. (Note: The 1,400 semiconductor job growth I said last month took place in December, 2021 in fact came in the previous December. Apologies for the error.)

In surgical appliances and supplies (which includes so many of the personal protective equipment and other medical goods so widely used to fight the CCP Virus), June employment dropped by 800 – these companies’ worst monthly performance since last July’s 1,100 decline. At least revisions were positive. May’s initially reported gain of 400 is now estimated at 500, and April’s figure stayed at an upgraded loss of 100. The surgical appliances and supplies sector now employs 3.69 percent more workers than in February, 2020; last month, this increase had been 4.36 percent.

The pharmaceuticals and medicines industry, by contrast, generated record-smashing net job creation in June. The 4,300 rise was the biggest monthly total ever in a data series that goes back to 1990, and greatly eclipsed the old mark of 3,200 recorded in September, 2019. Revisions, moreover, were excellent, with May’s initially reported 100 payroll decline now raised all the way up to a 1,200 gain, and April’s increase remaining at an upgraded 1,500. Headcounts in these businesses are now 11.58 percent higher than just before the pandemic, versus the 10.10 percent calculable last month.

The much smaller medicines subsector containing vaccines performed well on the jobs front, too, hiring 1,100 net new workers in June. In addition, May’s initially reported 600 increase is now judged to have been 700, and April’s monthly improvement stayed at 1,100. This subsector’s workforce has now expanded by 26.29 percent since just before the pandemic arrived in force, as opposed to the 24.47 percent calculable last month.

An aerospace cluster hit especially hard by CCP Virus-related travel restrictions experienced another robust employment month in June.

Aircraft companies hired 1,500 net new workers on month, and revisions were excellent as well. May’s initially reported net new hires figure was upgraded from 1,300 to 1,600 – their best such performance since last June’s increase of 4,400 (mis-reported last month as a rise of 4,000). And April’s advance remained at an upgraded 500. As a result, the aircraft workforce is only 9.64 percent smaller than just before the pandemic arrived, versus the 10.30 percent calculable last month.

Aircraft engines and engine parts jobs were up by 800 sequentially in June, May’s initially reported increase of 700 was revised up to 900, but April’s results stayed at a downwardly revised 800. This improvement enabled employment at these firms to come within 9.81 percent of their February, 2020 levels, versus the 10.91 percent calculable last month.

These increases were mirrored in the non-engine aircraft parts and equipment industry, which added 600 workers on month. May’s initially reported 300 jobs increase remained unrevised as did April’s upgraded 400 increase. The non-engine aircraft parts and equipment sectors, as a result, crept to within 14.62 percent of their employment levels of February, 2020, versus the 15.14 percent calculable last month.

The big questions for American workers, and domestic industry as a whole including manufacturing, are whether economic growth will really continue to deteriorate further (here’s a recent forecast that it won’t, at least in the third quarter); and if it does, will businesses continue to “hoard” labor. Let me know if there’s anyone you trust to provide accurate answers.

(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: U.S. Manufacturing’s Now Defying Hurricanes and Delta

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aircraft, aircraft parts, appliances, Boeing, CCP Virus, chemicals, computer and electronics products, coronavirus, COVID 19, Delta variant, electrical equipment, fabricated metal products, facemasks, Federal Reserve, furniture, Hurricane Ida, inflation-adjusted growth, machinery, manufacturing, masks, medical devices, medicines, oil refining, paper, personal protective equipment, petrochemicals, pharmaceuticals, plastics, PPE, real output, semiconductor shortage, supply chain, travel, ventilators, Wuhan virus, {What's Left of) Our Economy

Domestic manufacturing’s done it again. Just as with the Labor Department’s August jobs report, the Federal Reserve’s new release on manufacturing output for the month shows that industry kept dodging whatever potholes the CCP Virus and its highly infectious Delta variant keep digging for the rest of the U.S. economy.

America-based manufacturers’ inflation-adjusted production grew by a meager 0.11 percent sequentially in August. But output was held down by facility closures forced by Hurricane Ida in the petrochemicals, plastics resins, and petroleum refining sectors. Overall revisions were mixed, but some upgrades and downgrades in individual major industries were pretty remarkable, as will be seen below.

The biggest winners in the new price-adjusted manufacturing production report were the small, catch-all “other manufacturing” category (2.42 percent); furniture and related products (up 2.07 percent); computer and electronics products (whose 1.21 percent output rise may have been a response to the worldwide shortage of semiconductors); paper (up 1.07 percent); and fabricated metal products (up 0.74 percent).

The biggest losers were electrical equipment, appliances, and components (down 1.16 percent); textiles products (down 0.81 percent on month); machinery (down 0.80 percent); and the big chemicals sector (down 0.49 percent).

Normally, the machinery results would be discouraging, since its products are used so widely both in the rest of manufacturing and also in big non-manufacturing industries like agriculture and construction. But its August dip followed a July jump of 3.31 percent – its best production improvement since January’s 4.63 percent – which was dramatically upgraded from the previously reported 1.91 percent.

The electrical equipment category followed a similar pattern. Its July real production results were revised all the way up from 2.31 percent to 3.95 percent – its best such performance since January, 2010, when the economy was still in its early bounce-back from the Great Recession that followed the global financial crisis.

Also enjoying a solid August were two narrower manufacturing categories that remain in the news due to the ongoing effects of the CCP Virus. Air travel has of course suffered throughout the pandemic-era, and aerospace manufacturing giant Boeing has been hit with numerous related manufacturing and safety problems (including some pre-dating the pandemic, like the grounding of the popular 737 Max jetliner).

Yet aircraft and parts production in constant dollars advanced by 0.34 percent in August, and in another major revision, July’s previously reported 2.78 percent increase is now pegged at 4.10 percent – its best such result since January’s 6.79 percent burst. And June’s downgraded 3.57 percent rise was bumped back up to 3.84 percent. As a result, aircraft and parts production is now 12.63 percent higher in after-inflation terms than in February, 2020 – the last full data month before the virus began significantly affecting the U.S. economy.

The pharmaceuticals and medicines sector (which includes vaccines) saw a real month-to-month production increase of 0.89 percent in August, and revisions were modest and mixed. These results left inflation-adjusted output 12.33 percent higher than its immediate pre-pandemic levels.

But August real production sank sequentially by 1.73 percent in the vital medical equipment and supplies sector – which includes virus-fighting items like face masks, protective gowns, and ventilators.

On the brighter side, July’s initially reported 1.71 percent constant dollar production rise was revised up to 2.42 percent. June’s dramatically downgraded 1.54 percent decrease was upgraded to a 0.13 percent drop, and May’s upwardly revised 1.86 percent real growth was downgraded only slightly – to 1.78 percent. Even so, on a price-adjusted basis, this crucial industry is just 2.66 percent larger than before the CCP Virus arrived in force.

Domestic industry still faces important headwinds of course – and not just from the possibility that Delta keeps worsening America’s public health and economy, and that approaching winter weather triggers a new wave of infections, hospitalizations, deaths, and restrictions. Those global supply chain snags are still with us, too.

But throughout the pandemic era, U.S.-based manufacturers have overcome obstacles just like this, and their consistent vigor indicates that it’s the pessimists about their future prospectswho now face the biggest burden of proof.

(What’s Left of) Our Economy: It’s an Autos Story Again for U.S. Manufacturing Production

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aerospace, aircraft, aluminum, apparel, automotive, Boeing, CCP Virus, chemicals, China, computers, coronavirus, COVID 19, Donald Trump, electronics, facemasks, Federal Reserve, health security, inflation-adjusted output, machinery, manufacturing, medical supplies, paper, pharmaceuticals, PPE, printing, real growth, semiconductor shortage, semiconductors, shutdowns, steel, stimulus, tariffs, vaccines, Wuhan virus, {What's Left of) Our Economy

Earlier in the CCP Virus era, the U.S. manufacturing production story was largely an automotive production story – because the industry shut down so suddenly and completely during the pandemic’s first wave and the deep economic downturn it triggered, and then began reopening at a record pace. And today’s Federal Reserve figures show that domestic industry’s growth is being driven by dramatically fluctuating vehicles and parts output once again – but this time it seems due significantly to the global semiconductor shortage that’s deprived the sector of critical parts.

Also noteworthy about today’s Fed manufacturing release (which covers May): It incorporates the results of the benchmark revision of these data for the 2017-19 period. As explained in yesterday’s post on the subject, the new numbers create a new baseline for pre-pandemic manufacturing growth, and therefore a new picture of how big the virus-induced downturn was, and how strong the recovery has been – at least until the next benchmark revision. And of course, the new figures therefore supersede those in the April Fed release I reported on last month.

Automotive’s influence on the May numbers is clear from the following: Total inflation-adjusted sequential growth for U.S.-based manufacturing hit a strong 0.89 percent last month. Without automotive (whose 6.69 percent monthly output pop followed a 5.57 percent April drop), the increase would have been just over half that – a still solid 0.50 percent. Don’t be surprised if the microchip shortage keeps these results on a roller coaster.

Its May increase brought total real domestic manufacturing output back within 0.31 percent of its last pre-pandemic level, in February, 2020. In March and April, such production plummeted by 19.41 percent. Since then, it’s surged by 23.90 percent. For the record, as I wrote yesterday, the pandemic-spurred Spring, 2020 nosedive was slightly shallower (0.92 percent) than judged before the revisions (1.42 percent) but the comeback through this past April was a bit weaker (22.81 percent versus 23.27 percent).

Machinery making enjoyed a good month in May, and as known by RealityChek regulars, that’s good news for all domestic manufacturing and the rest of the economy, since its products are so widely used. Constant dollar output improved by 0.78 percent last month, and consequently, the sector is now 2.35 percent bigger in these terms than just before the virus started depressing the economy. One downside should be noted, though: The new revision indicates that the machinery recovery has actually be significantly slower than previously estimated.

Manufacturing’s list of other big inflation-adjusted production winners in May featured some real surprises. The apparel and leather goods industries remain shadows of their historic selves, but their real output last month jumped 2.59 percent – their best such result since January’s 2.06 percent. Moreover, this sector has grown in real terms by 6.74 percent since just before the pandemic – much faster than manufacturing as a whole.

After-inflation production in the small printing and related activities industry grew by 2.59 percent – also its best result since January (3.99 percent).

But some big sectors saw healthy gains in May, too – notably chemicals (whose products are also used throughout the economy) and computer and electrnics products. The former saw real production advance by 2.19 percent sequentially last month – its best such result since March’s weather-aided 4.08 percent. And the latter grew in May by 1.60 percent.

The biggest losers? Paper led this pack by far, with May constant dollar production sinking by 1.59 percent on month – its worst such showing since January’s 1.78 percent decrease.

Likely due to Boeing’s continuing production and safety problems (more on which later), the aerospace and miscellaneous transportation sector’s after inflation production sank by 0.95 percent sequentially in May – and that followed a 2.55 percent nosedive (no pun intended) in April. And wood products real output fell by 0.82 percent.

But the losers’ list contains a big surprise, too. Complaints keep coming that that the domestic steel and aluminum industries (and especially the steel-makers) have responded to tariffs simply by enjoying the higher resulting prices and sitting on these winnings. So it’s noteworthy that even after a 0.82 percent monthly real output decline in May, primary metals production after inflation is slightly (0.15 percent) higher than in immediate pre-pandemic-y February, 2020 – another such performance that’s bested that for all manufacturing.

The aforementioned problems suffered by Boeing keep coming through in the real output data for the aircraft and parts sub-sector of the aerospace and miscellaneous transportation industry. In May, inflation-adjusted output was down 1.47 percent on month – much bigger than the larger industry fall-off. And that came on the heels of April’s 2.21 percent decrease. Real aircraft and parts production is still 4.36 percent above its immediate pre-pandemic level, but given the ongoing post-CCP Virus worldwide rebound in air travel, these figures are definitely disappointing – and moving in the wrong direction.

By contrast, the big pharmaceuticals and medicines sector is still benefitting from reopening headwinds. May’s 0.22 percent monthly real output increase was admittedly modest, especially since this sector includes vaccine production. But it’s grown by 8.44 percent since the virus began spreading rapidly in the United States. on g – also delivered a disappointing performance in April, especially since it includes vaccines.

But both the May real production numbers and the benchmark revision left the vital medical equipment and supplies sector a conspicuous production laggard. This industry – which includes virus-fighting items like face masks, face masks, protective gowns, and ventilators – grew in real tems by just 0.19 percent sequentially in May, and April’s after inflation output was down 1.66 percent. As a result, this sector is turning out only 0.35 percent more product than just before the pandemic’s arrival – which doesn’t seem to augur well for national preparedness for the next pandemic.

If I was a betting person (I’m not), I’d still wager on better days ahead for U.S. domestic manufacturing – because so many powerful supportive trends and developments remain in place, ranging from massive government spending and other forms of stimulus to the virus’ continuing retreat to waning consumer caution to huge amounts of pandemic-era consumer savings to ongoing Trump tariffs that keep pricing huge numbers of Chinese goods out of the U.S. market.

But no one should forget about a list of threats to the pace of manufacturing growth, if not growth itself – like the prospect of higher taxes and more regulations, and the possibility that consumer demand will keep growing but switch away from goods to the hard-hit but quickly reopening service sectors (which of course do buy manufactures). Inflation isn’t good for strong (real) growth, either, though I’m an optimist on this front.

Ultimately, though, I’m most struck by evidence of domestic manufacturers’ continuing optimism about the prospects of their businesses. If they’re still confident about their futures, that remains good enough for me.

Following Up: Inside April’s U.S. Manufacturing Crash II

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aerospace, appliances, automotive, CCP Virus, chemicals, components, computers, coronavirus, COVID 19, durable goods, electrical equipment, electronics, fabricated metals products, Federal Reserve, Following Up, food products, healthcare goods, inflation-adjusted output, machinery, manufacturing, manufacturing output, manufacturing production, medical devices, metals, non-durable goods, paper, real growth, Wuhan virus

A little earlier today, RealityChek presented some lowlights from this morning’s Federal Reserve U.S. manufacturing production report (for April). As promised, here’s a more granular look at the results, which yield even more insights as to how the CCP Virus blow to the economy is reflecting – and probably influencing dramatically changed spending patterns.

The table below shows the findings for durable goods industries, the super-category that covers products with expected usage and shelf lives of three years or more. Included are the original March inflation-adjusted output changes, the revised March data, and the April statistics:

Wood products:                                                -4.22%       -3.15%      -9.04%

non-metallic mineral products:                        -6.56%      -6.50%     -16.26%

Primary metals:                                                -2.82%      -3.95%     -20.37%

Fabricated metal products:                               -8.28%      -4.23%     -11.33%

Machinery:                                                       -5.56%      -3.05%     -10.98%

Computer & electronic products:                     -1.89%      -1.24%      -5.02%

Electrical equip, appliances, components:       -2.24%      -2.83%      -5.99%

Motor vehicles and parts:                               -28.04%    -29.96%    -71.69%

Aerospace/miscellaneous transport equip:      -8.12%      -8.90%     -21.65%

Furniture and related products:                       -9.99%      -6.50%     -20.60%

Miscellaneous manufacturing:                        -9.94%      -7.09%       -9.05%

   (contains most of those non-pharmaceutical healthcare goods)

As in the broader category analysis from earlier today, the automotive collapse – over both March and April – stands out here, although it was joined in the double-digit neighborhood (at much lower absolute levels of course) by six of the other eleven sectors. And as predicted in last month’s post on the March Fed report, the sector that’s held up best has been the computer and electronics industry – though following surprisingly close behind is electrical equipment, appliances, and their components.

It’s also easy to see how the rapid deterioration in automotive and the miscellanous transportation category that includes aerospace (especially in April for the latter) spilled over into supplier industries like metals and fabricated metal products, and machinery.

One durable goods puzzle: the relatively fast April decrease in the miscellaneous manufacturing category, which contains non-pharmaceutical medical goods so crucial for the nation’s CCP Virus response.

The second table shows the same information for the non-durables super-category, where the virus impact has been considerably lighter. Among notable results – the sharp worsening of after-inflation output in the food sector. Although it fared relatively well, there can be little doubt that the worker safety problems in meat-packing plants, along with the cratering of big customers – mainly the restaurant and hotel businesses – played big roles.

The non-durables results also make clear that the sector that’s survived best so far has been paper. Also excelling (at least relatively speaking): the enormous chemicals sector. This industry also contains the pharmaceutical industry, although the any positive CCP Virus impact seems unlikely to date because no vaccines or treatments have been developed yet.

Food, beverage, and tobacco products:          -0.76%      -1.56%       -7.10%

Textiles:                                                        -14.05%      -6.98%     -20.72%

Apparel and leather goods:                          -16.54%    -10.31%     -24.10%

Paper:                                                            -2.04%      -0.08%        -2.58%

Printing and related activities:                    -18.18%    -10.75%      -21.16%

Petroleum and coal products:                       -5.93%      -6.56%      -18.55%

Chemicals:                                                   -1.65%      -1.50%         -5.14%

Plastics and rubber products:                      -7.60%       -4.37%       -11.03%

Other mfg (different from misc above):     -5.37%       -4.29%       -10.37% 

The virus crisis contains so many moving parts (e.g., vaccine and therapeutics progress; infection, fatality, and testing data; uneven state reopening and national social distance practicing; consumer attitudes; second wave possibilities) that extrapolating the manufacturing trends to date seems foolhardy. But tracking industry’s winners and losers as the months pass could still provide important clues as to how much further the economic woes it’s caused will continue; and when, how quickly, and how completely recovery arrives.