Manufacturers ended the second quarter on a high note. Last week, the Federal Reserve Board reported that manufacturing production advanced by 0.6 percent in June. This marks the fourth-consecutive monthly increase and the the fastest monthly rise in the second quarter. As a result, the manufacturing sector grew at a solid 3.5 percent annual rate last quarter — the fastest pace since the third quarter of 2006. The level of output in manufacturing, even excluding “high-tech” sectors, now stands at an all-time high.
As shown in the chart below, the state of manufacturing of manufacturing has improved after production fell in the fourth quarter of 2006 and then basically stagnated in first quarter of this year. The bubble chart below should be read as follows:
(1) The size of the bubble represents the relative size of each manufacturing industry
(2) The color shows if the industry has increased (green) or decreased (red) employment over the past year
(3) Placement: the x (horizontal) axis measures growth in production of each industry over the past year while the y (vertical) axis measures the growth (at an annual rate) in production in the second quarter.
Basically, here is how to read this chart.
Industries in the upper-right quadrant are in expansion (growth in most recent quarter and over past year)
Industries in the upper-left quadrant are in recovery (growth in most recent quarter but down over past year)
Industries in the lower-right quadrant are struggling (down in most recent quarter but growth over past year)
Industries in the lower-left quadrant are in recession (down in most recent quarter and down over past year)
Of the 19 major manufacturing industries, 14 are in either expansion or recovery.
Eight sectors, representing 53% of manufacturing output, are currently in expansion. These sectors include: computers and electronics, aerospace, misc. mfg (mostly medical equipment and supplies), plastics, electrical equipment, food and beverage, fabricated metals and machinery. Six of these sectors have added employment over the past year.
Six sectors, representing 22 percent of manufacturing output, are in recovery. These sectors include: primary metals, motor vehicles, nonmetallic minerals, wood products, furniture, and paper production. While an encouraging sign is that five of these sectors were in recession last quarter, employment declines have continued in all these industries over the past year.
Two sectors, representing 8 percent of manufacturing output, are struggling. These sectors are printing and petroleum.
And finally, three sectors, representing 17 percent of manufacturing output are in recession. These sectors are chemicals, textiles and apparel. It should be noted that chemical output is only down 1 percent over the past year. This sector has recovered from the 2001 recession. This is not the case for textiles or apparel. After a decade-long downturn, apparel production has essentially remained stagnant since mid-2004. The downturn in textile production, meanwhile, has not relented since it began in 1998. More than other manufacturing sectors, these two industries have struggled against a rapid rise of import competition.