Industrial Production Bounces Back in July

By SBE Council at 17 August, 2023, 4:30 pm

by Raymond J. Keating – 

Manufacturing overwhelmingly is the domain of small businesses in the U.S.

Consider that 93.1 percent of employer firms in manufacturing have fewer than 100 employees, according to the latest Census Bureau data (2020). Therefore, when looking at each month’s report on industrial production, it very much is a small business story.

For July, according to the latest report from the Federal Reserve, industrial production – i.e., the physical output, free from price changes, of the manufacturing, mining and utility sectors – grew by 1.0 percent in July. That was a welcome bounce back from declines of 0.8 percent in June and 0.4 percent in May.

Similarly, manufacturing production – the most significant portion of overall industrial production – grew in July, up by 0.5 percent. That gain came after declines of 0.5 percent and 0.3 percent in June and May, respectively.

Mining output also grew by 0.5 percent in July – after big declines of 0.9 percent in June and 0.7 percent in May.

Compared to a year earlier, though, industrial production was down by 0.2 percent in July, with manufacturing output off by 0.7 percent.

As noted in the above charts, overall industrial production and manufacturing production have a long way to go in terms of getting back to where each should be given the stagnation and relative decline suffered not just over the past year, but for more than decade-and-a-half.

What’s needed? From a policy perspective, as SBE Council has long argued, real differences would be made via substantive and permanent tax relief; a comprehensive deregulation effort; advancing free trade (i.e., reducing governmental barriers to trade); and instituting a welcoming immigration agenda to meet U.S. labor needs and to provide some fuel for entrepreneurship. Manufacturing, and other economic sectors, need policies that reduce costs, and incentivize entrepreneurship and investment.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist and The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist.