The Federal Reserve’s report on August industrial production released earlier today shows that the economic recovery is slowing. Overall industrial production rose just 0.2 percent last month, the second instance of sub-par growth in the past three months. While it is somewhat encouraging that only six of the 19 major manufacturing industries posted declines in production last month, the fact remains that during the three months ending in August, manufacturing output increased at an annual rate of just 2 percent, the slowest rise in 14 months. So after falling 17.5 percent during the 18 months ending in June 2009, manufacturing production still remains 9 percent below the peak attained in December 2007.
While some of the deceleration in growth that has taken place in recent months is due to the fact that temporary supports for growth, such as fiscal stimulus and inventory restocking, are now largely in the past, increased uncertainty with respect to federal tax and regulatory issues, documented in this year’s NAM Labor Day Report, is acting as a burden to the recovery.