Industrial Production Resumes Growth in April

By SBE Council at 17 May, 2023, 10:00 am

by Raymond J. Keating – 

We needed to see a positive report on industrial production for April, and that’s largely what we got from the Federal Reserve.

After being flat in both February and March, industrial production – that is, the physical output, free from price changes, of the manufacturing, mining and utility sectors – grew by 0.5 percent in April.

That included a 1.0 percent gain in manufacturing production, which had declined by 0.8 percent in March. Regarding the April gain, the Federal Reserve noted that it was “bolstered by a strong gain in the output of motor vehicles and parts; factory output excluding motor vehicles and parts moved up 0.4 percent.” Also, it was noted that the production of business equipment grew by 1.2 percent, which is a positive for investment.

Source: Federal Reserve Bank of St. Louis, FRED

Also, after two months of declines, mining output grew by 0.6 percent.

Compared to a year earlier, total industrial production was up by only 0.2 percent, with manufacturing output down by 0.9 percent.

As noted in the above chart on manufacturing production, the manufacturing sector of our economy has a long way to go in terms of recovering – compared to late 2007, compared to fall 2018, and compared to where output stood in October of last year.

And this very much is a small business issue, as 93.1 percent of employer firms in manufacturing have fewer than 100 employees, according to the latest Census Bureau data. On the policy front, that will require a major shift in terms of advancing tax relief, deregulation, free trade, limited government spending and sound money.

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.