Industrial Production Up in November: Growth Tied to Regulatory Relief and Tax Reform Expectations

By at 15 December, 2017, 3:55 pm

by Raymond J. Keating-

According to the Federal Reserve, industrial production (that is, the actual output in manufacturing, mining, and electric and gas utilities industries) expanded by 0.2 percent in November.

This follows on an upwardly revised expansion of 1.2 percent for October, and is the third consecutive month of growth.

In terms of manufacturing output, it also rose in each of the last three months, by 0.2 percent in November and 1.4 percent in October.

For good measure, mining production jumped by 2.0 percent in November, thanks to a “post-hurricane rebound in oil and gas extraction.”

These positive moves are most welcome, especially after industrial production actually declined in 2015 and 2016, along with four of the first eight months of 2017 showing either no growth or decline. At the same time, it must be recognized, as the Fed reported, “Excluding the post-hurricane rebound in oil and gas extraction, total industrial production would have been unchanged in November.”

In addition to this latest report, a longer view reminds us that total industrial production is basically was at the same point in November 2017 as it was a decade earlier in November 2007 just before the Great Recession hit. That is, the index registered 105.3 in November 2007 and 106.4 in November 2017 – growth of only 1 percent over a decade. Meanwhile, manufacturing output in November 2017 (105.9) was still actually lower than the December 2007 high (108.5) – down by 2.4 percent.

Policy Shifts Welcomed and Warranted

All of this speaks to the clear need for a major shift in both tax and regulatory policies. The unfortunate reaction to the credit and economic mess of 2008-09 was an expansion of government intrusiveness, including more regulation and higher taxes. The efforts by the current administration and Congress to reverse course in these areas already has started to make a real difference, and implementing a tax package featuring much lower tax rates on businesses and expanded expensing will further incentivize business investment and production by firms of all types and sizes.

The same goes for substantive changes in terms of regulatory relief and reform.  In a media event on December 14, President Trump said his Administration would continue on with the same deregulatory path in 2018, but up the current “one in, two out” regulatory approach to “one in, three out” next year. As the President noted in his remarks, federal agencies have actually issued 22 deregulatory actions for every one new regulatory action since he took office.

The industrial sectors of our economy seem to be moving in the right direction, and that will be further aided by implementing pro-entrepreneurship, pro-investment and pro-growth policies in Washington.


Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council.

Keating’s latest book published by SBE Council is titled Unleashing Small Business Through IP:  The Role of Intellectual Property in Driving Entrepreneurship, Innovation and Investment and it is available free on SBE Council’s website here.

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