Manufacturing Output “Off” at Start of 2019

By at 17 March, 2019, 12:40 pm

by Raymond J. Keating-

According to the latest report from the Federal Reserve, industrial production – that is, the real output of the manufacturing, mining, and electric and gas utilities – performed poorly during the first two months of 2019.

Overall industrial production inched forward by 0.1 percent in February, which followed on a decline of 0.4 percent in January.

Unfortunately, manufacturing production, the biggest part of industrial output, fell by 0.4 percent in February, and that came after a decline of 0.5 percent in January.

Manufacturing output peaked just prior to the last recession. Unfortunately, more than 11 years later, manufacturing production remains below that high. (See the following chart.)

Source: Federal Reserve Bank of St. Louis, FRED

The manufacturing sector is overwhelmingly populated by small and midsize businesses. For example, 74.7 percent of manufacturing employer firms have fewer than 20 workers, 93.5 percent fewer than 100 workers, and 98.5 percent fewer than 500 workers. These small businesses have been confronted by a kind of rolling series of significant problems or challenges, namely, the Great Recession and then increased taxes and regulatory costs and uncertainties during the Obama years.

And while the reduction in tax and regulatory burdens during the Trump administration surely have helped manufacturers, other governmental costs and uncertainties have been imposed on the trade front, with costs and uncertainties increasing, due to quotas, tariffs, and threats for more trade restrictions.

Like other businesses, manufacturing is boosted by getting the big policies right, namely, low taxes, light regulation, restrained government spending, and free trade.


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


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