Following Year of Solid Growth, Industrial Production Falls in January

By at 16 February, 2019, 3:21 pm

by Raymond J. Keating-

On February 15, the Federal Reserve reported that industrial production – the output of the nation’s industrial sectors, i.e., manufacturing, mining and utilities – declined in January by 0.6 percent.

Manufacturing output, which makes up about 75 percent of production, declined by 0.9 percent. The big negative was in motor vehicle manufacturing. Indeed, manufacturing production of motor vehicles and parts plummeted by 8.8 percent in January. However, a solid majority of all manufacturing industry groups experienced declines in January.

Compared to a year earlier, the good news is that overall industrial production was up by 3.8 percent, with manufacturing up by 2.9 percent. For good measure, industrial production growth for all of 2018 was the best performance (4.1 percent growth) for a year unaffected by the Great Recession since the late 1990s. And manufacturing production in 2018 was the strongest since 2012. And as noted in the following chart (from the Federal Reserve Bank of St. Louis), manufacturing production has been on the rise since mid-2016, but still has not gotten back to pre-Great Recession levels.

Also, given that these numbers tend to be volatile from month to month, the hope is that we will see a nice bounce back from the January numbers.

However, other factors come into play that warrant as least some concern, such as trade policies being pushed by the Trump administration, a new House of Representatives largely hostile to further beneficial steps regarding tax and regulatory relief, a recent drop in U.S. retail sales, and widespread predictions of a global economic slowdown in 2019.


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

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