PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Manufacturing Production Recovery Continued in November

By at 15 December, 2020, 5:40 pm

by Raymond J. Keating-

The latest report on industrial production (i.e., the actual output of the manufacturing, mining and utility sectors of our economy) showed that manufacturing production continued its recovery in November.

Total industrial production for November grew by 0.4 percent. Utilities output fell by 4.3 percent, while mining grew by 2.3 percent.

As for manufacturing output, which accounts for the biggest share of industrial production, it grew by 0.8 percent in November. That marked the seventh straight month of gains (given recent revisions) in manufacturing production, after large drops in March and April.

Source: Federal Reserve Bank of St. Louis, FRED

This stretch of growth in manufacturing production obviously is most welcome.

At the same time, though, compared to a year earlier (November 2020 versus November 2019), total industrial production was down by 5.5 percent, with manufacturing down by 3.7 percent.

In fact, heading into the pandemic, manufacturing output had already been struggling. For all of 2019, manufacturing production was down by 0.2 percent, and the first two months of 2020 saw a slight drop in January and February being flat. Look back further, and unfortunately, manufacturing production has failed to get back to where it was before the previous recession – never mind accounting for lost growth (see the chart below).

Source: Federal Reserve Bank of St. Louis, FRED

That’s deeply troubling, to say the least.

As we look beyond this pandemic, serious efforts need to be undertaken to improve the foundational climate for entrepreneurship and investment that drive innovation and growth in each sector of our economy, including manufacturing.

The answers do not lie with government industrial policies, subsidies, or protectionism. Instead, it’s about removing governmental obstacles and burdens, namely, tax and regulatory relief, and advancing free trade.

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

 

 

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