PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Industrial Production Flat in April

By at 17 May, 2024, 1:38 pm

by Raymond J. Keating – 

Some key data point to a disappointing start to the economy in the second quarter. First, we saw that retail sales were down in April in real terms, and that’s followed by the Federal Reserve’s reporting that industrial production was flat in April.

The percent change in industrial production, which is the actual physical output of the manufacturing, mining and utility sectors free from price changes, for April registered 0 percent, i.e., no gain. That’s after the March change was revised down from 0.4 percent to a mere 0.1 percent.

Obviously, manufacturing production is a key component to industrial production, and manufacturing production actually declined by 0.3 percent in April. That came after a gain of 0.2 percent in March.

Finally, compared to a year earlier, total industrial production in April was down by 0.4 percent, and manufacturing production was off by 0.5 percent.

Politicians love talking about how important manufacturing is to the U.S. economy. Even if they believe that, too many seem intent on imposing policies that undermine the industrial sector. Sound policy isn’t about politicians and their appointees running industrial policies whereby they tax individuals and other businesses in order to dole out dollars to their politically favored businesses. As history and economic common sense (after all, what makes anyone think that politicians would possess the incentives and knowledge to wisely “invest” taxpayers’ money?) make clear, that’s a recipe for waste.

Piling on with burdensome regulations and protectionist trade measures, for example, as has been the case, it shouldn’t surprise anyone that manufacturing output in the U.S. has suffered for some time now (see the following chart).

Source: Federal Reserve Bank of St. Louis, FRED

Manufacturers (and all other businesses, for that matter) need a sound foundation upon which entrepreneurs, businesses, and investors are able to make decisions in the competitive marketplace, that is, they need the incentives and resources to take on the risks and uncertainties of starting up and growing businesses. That means low taxes, a light regulatory touch, free trade, sound money, and limited government spending. Get that combination right, and the economy will flourish, including the industrial sector.

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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