PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Industrial Production Drops to Close Out 2022

By at 19 January, 2023, 10:28 am

by Raymond J. Keating – 

The latest industrial production numbers from the Federal Reserve pointed to a poor close to 2022 for the industrial sectors of the U.S. economy.

Total industrial production – that is, the physical output, free from price changes, of the manufacturing, mining and utility sectors – declined by 0.7 percent in December, which followed on a revised decline of 0.6 percent in November. For good measure, October was flat.

The December 2022 level of industrial production (as noted in the following chart) was at the same level as what occurred eight years earlier.

Source: Federal Reserve Bank of St. Louis, FRED

As for manufacturing output, the largest chunk of industrial production, it declined by 1.3 percent in December, following on a drop of 1.1 percent in November. Over the past year, manufacturing production declined by 0.5 percent.

It’s also deeply troubling to note that the December 2022 level of manufacturing production stood at the same level as registered 17 years earlier, and notably below the high set 15 year ago. (See the following chart.)

Source: Federal Reserve Bank of St. Louis, FRED

By the way, it must be understood that manufacturing in the U.S. overwhelmingly is about small business – 74.3 percent of employer firms in manufacturing have fewer than 20 workers and 93.1 percent fewer than 100 employees.

In addition, mining production fell by 0.9 percent in December, which came after a decline of 1.2 percent in November.

No matter how these numbers are sliced and diced, there’s no getting around the fact that the industrial sector, including manufacturing, declined in the last two months of 2022. Combine this data with the poor retail sales data from November and December, and a dark economic picture emerges at the close of 2022 and as we turn to 2023.

For good measure, it must be noted that the U.S. industrial sector has stagnated or declined since 2007, and it’s no coincidence that hyper-regulation has been more the rule than the exception over this past decade-and-a-half. That’s not a coincidence, and it points to the desperate need for U.S. policymakers not only to cease expanding regulatory burdens, but to undertake a serious, common sense deregulation effort – rolling back burdens that are too costly and fail to pass muster with basic economics.

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.

 

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