PROTECTING SMALL BUSINESS, PROMOTING ENTREPRENEURSHIP

Industrial Production Bounces Back in May

By at 19 June, 2024, 11:30 am

by Raymond J. Keating – 

As SBE Council has noted before, the industrial sector of our economy, in particular, manufacturing, has faced difficulties for some time now. So, the solid industrial production report from the Federal Reserve for May is appreciated.

After two rough months, industrial production – that is, the actual physical output of the manufacturing, mining and utility sectors free from price changes – grew by 0.9 percent in May. It was flat in April and down by 0.1 percent in March.

And manufacturing output, a key component, also was up by 0.9 percent in May. Manufacturing production was down by 0.4 percent in April and by 0.1 percent in March.

And over the past year, total industrial production grew by 0.4 percent, with manufacturing up by only 0.1 percent.

As noted in the following two charts, the industrial sector’s output effectively experienced stagnation since 2007, with manufacturing output actually down notably.

Source: Federal Reserve Bank of St. Louis, FRED

Source: Federal Reserve Bank of St. Louis, FRED

Keep in mind that when talking about manufacturing, we’re overwhelmingly talking smaller businesses. For example, based on the latest Census Bureau data (2021), 60.3 percent of employer firms in manufacturing have fewer than 10 employees, 75.2 percent fewer than 20 employees, and 93.4 percent fewer than 100 workers.

Yes, the most recent month’s numbers are welcome, but how can growth be further secured or advanced?

As SBE Council has noted previously, revitalizing manufacturing isn’t about protectionism or industrial policy; but instead, policymakers need to be incentivizing entrepreneurship and investment via low taxes, regulatory relief, and advancing free trade. Remove or reduce government burdens and obstacles, and thereby let innovation and growth flourish.

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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