The Federal Reserve reported today that industrial production fell 1.1 percent in May, and that the manufacturing component (which accounts for three quarters of industrial production) fell a similar 1 percent.
Today’s report confirms that manufacturers are clearly in the worst economic decline since the Great Depression. Ongoing declines in the production of consumer goods, business equipment and construction supplies shows that the private sector continues to remain very weak two–thirds the way through the second quarter. At the same time, companies are continuing to work off excess inventories built up during the second half of last year. This will likely continue to depress production into the third quarter.
This is the longest and deepest recession for manufacturers since the Great Depression. With the May decline in manufacturing production joining last month’s employment losses, the current recession has now extended into its 17th month. This surpasses both the 1974-1975 and 1981-1982 recessions, both of which lasted 16 months. For the manufacturing sector, it is also the deepest: Since December 2007, manufacturing production has fallen 17 percent, exceeding the declines in both the 1974-1975 and 1981-1982 recessions and surpassing half the 32 percent drop in manufacturing production during the first 17 months of the Great Depression.