Economic News: Nice Gains in Industrial Production

By at 17 July, 2018, 1:29 pm

Small Business Insider


by Raymond J. Keating-

The Federal Reserve served up some good news in its latest estimate of industrial production, i.e., the output of the nation’s industrial sectors, i.e., manufacturing, mining and utilities.

Specifically, industrial production bounced back from a 0.5 percent decline in May to grow by 0.6 percent in June. That included manufacturing production snapping back, growing by 0.8 percent in June versus -1.0 percent in May.

For the entire second quarter, industrial production expanded by a robust 6.0 percent.

That’s welcome news for second quarter economic growth. And from June 2017 to June 2018, industrial production grew by 3.8 percent.

Amidst the good news, however, we need to keep an eye on manufacturing output. While growth recovered in June, the recent trend on manufacturing remains a bit troubling. For example, second quarter annualized growth registered only 1.9 percent, after 1.7 percent in the first quarter. Those rates were off markedly from 5.3 percent in the fourth quarter 2017. For good measure, the June 2017-to-June 2018 growth rate was a sluggish 1.9 percent. Keep in mind, manufacturing production also remains below the high hit way back in December 2007.

Three overarching policy factors come into play here. The positives have been business tax reform and a brake on regulation during the Trump administration. These boost incentives for investment, innovation and production in the industrial sector. The negatives come with tariffs and trade policy being advanced by the Administration. Those measures are creating uncertainty, raising costs, and reducing international opportunities for U.S. entrepreneurs and businesses.

In the end, if the U.S. would shift to freedom on trade, the policy foundation for sustained, strong growth in the industrial sector would be solid.


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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