Industrial Production Resumed Growth in July

By at 18 August, 2021, 11:51 am

by Raymond J. Keating – 

Industrial production – i.e., the actual output of the manufacturing, mining and utility sectors of our economy – grew by 0.9 percent in July, after a gain of 0.2 percent in June, according to the latest report from the Federal Reserve.

The key point in the July report was the return to growth in manufacturing production after a decline in June. In fact, as noted in the chart below, manufacturing output has been up-and-down throughout 2021.

Source: Federal Reserve Bank of St. Louis, FRED

It was noted in the report:

“About half of the gain in factory output is attributable to a jump of 11.2 percent for motor vehicles and parts, as a number of vehicle manufacturers trimmed or canceled their typical July shutdowns.” At the same time, however, it was added, “Despite the large increase last month, vehicle assemblies continued to be constrained by a persistent shortage of semiconductors; the production of motor vehicles and parts in July was about 3-1/2 percent below its recent peak in January 2021.”

Compared to a year ago, though, industrial production was up by 6.6 percent, including a gain of 7.4 percent in manufacturing output. Also, manufacturing production finally climbed above the pre-pandemic February 2020 level in July 2021. That’s all good news.

Still, manufacturing output in July 2021 stood below the recent high set in August 2018, not to mention down from the all-time high registered back in December 2007.

As we look ahead, the Delta variant obviously raises near-term questions for the industrial sector, and the rest of the economy. And the same goes for a misguided policy mix being pushed featuring higher taxes, more regulation, continuing trade restrictions, and increased government spending.

The economy, in fact, needs the exact opposite, that is, it needs tax and regulatory relief, the advancement of free trade, and reining in government spending.

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


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