PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Industrial Production Data: 2024 Begins with a Decline

By at 16 February, 2024, 11:44 am

by Raymond J. Keating – 

The U.S. industrial sector had a poor start to 2024.

Industrial production – i.e., the physical output, free from price changes, of the manufacturing, mining and utility sectors – declined by 0.1 percent in January, according to the latest report from the Federal Reserve. After a downward revision, December was flat. Compared to a year earlier, industrial production in January was flat.

As for manufacturing production, it declined by 0.5 percent in January, and that followed on a 0.1 percent gain in December, which was a downward revision. Compared to a year earlier, manufacturing production was down by 0.9 percent.

Meanwhile, mining plummeted by 2.3 percent in January, and was down by 1.2 percent versus a year earlier. The mining decline in January was attributed to “a weather-related pullback in oil and gas extraction and a drop in coal production.”

Finally, utilities output jumped by 6.0 percent in January.

Industrial production, including manufacturing, has been a serious concern for more than a decade-and-a-half now. As noted in the first chart below, industrial production in 2024 stood at the same level as December 2007, and is down from a post-pandemic high in September 2022. The story for manufacturing production (the second chart below), which is the largest chunk of industrial output, is even worse.

Source: Federal Reserve Bank of St. Louis, Fred

Source: Federal Reserve Bank of St. Louis, Fred

Policymakers, unfortunately, remain oblivious, or come up with all the wrong ideas (such as trade protectionism and/or industrial policy subsidies).

What the industrial sector most clearly needs are substantive regulatory reforms that reduce excessive and unnecessary regulatory costs, and establish institutional checks on excessive regulation. Unfortunately, what we’re overwhelmingly seeing instead are efforts to increase regulatory burdens. And so long as the U.S. remains on the path of more regulation, stagnation and decline in industrial output will be the rule.

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, The Weekly Economist II: 52 More Quick Reads to Help You Think Like an Economist and The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

 

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