Analysis: Industrial Production Declined in August

By SBE Council at 15 September, 2022, 9:01 pm

by Raymond J. Keating – 

The latest industrial production report from the Federal Reserve was disappointing, as total industrial production declined in August, including a slowdown in manufacturing output. As a result, industrial production has been down or flat in three of the last four months.

Industrial production – which is the physical output, free from price changes, of the manufacturing, mining and utility sectors of our economy – had increased by 0.5 percent in July, after being flat in June and declining by 0.1 percent in May. The August change came in at -0.2 percent. (The following chart takes a long-run view of industrial production, which largely has stagnated since late 2007.)

Source: Federal Reserve Bank of St. Louis, FRED

Mining output was flat in August after posting five straight months of gains, and utilities declined by 2.3 percent.

Meanwhile, manufacturing production – the largest part of industrial production – grew by 0.1 percent. But that was down from 0.6 percent growth in July, and declines of 0.5 percent and 0.4 percent in June and May, respectively.

The August data serves as another warning sign, along with the latest retail sales data, about the state of the economy during the third quarter of this year, after real GDP declined in each of the first two quarters.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.