Manufacturing Production Declines in March

By at 15 April, 2023, 9:28 am

by Raymond J. Keating –

Industrial production, according to the latest report from the Federal Reserve, increased by 0.4 percent in March. That increase was all about a big rise in utilities output after a mild February gave way to a more seasonal March.

Manufacturing production declined by 0.5 percent in March, with mining output falling by the same percentage.

Annual revisions to the data issued late last month saw some improvement in manufacturing output during February and January of this year, but a slight worsening in December of last year.

Combine this data with the latest manufacturing PMI read, and there’s reason for concern. Indeed, it can be argued that manufacturing has been in a recession over the past five months. (See the following chart.)

Source: Federal Reserve Bank of St. Louis, FRED

Over the past year, total industrial production grew by only 0.5 percent. However, manufacturing output actually declined by 1.1 percent.

As SBE Council has noted before, and as illustrated in the following chart, manufacturing output has failed to recover to its recent high set in late summer 2018 and is off markedly from the all-time high set in late 2007.

Source: Federal Reserve Bank of St. Louis, FRED

Policymakers often talk favorably about manufacturing and small business. It’s important that these shouldn’t be considered separate points, as most manufacturers are small businesses. For example, 74 percent of employer firms in the manufacturing sector have fewer than 20 employees and 93 percent fewer than 100 workers.

At the same time, however, President Biden and many in Congress remain unconcerned about policies that actively work against U.S. manufacturers and small businesses, including weighty tax and regulatory burdens, protectionist trade policies, and immigration policies that fail to recognize labor force realities and needs.

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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