The Federal Reserve Board reported that industrial production dropped 0.2 percent in November, weaker than expected and reversing October’s strong 0.7 percent increase. For the manufacturing sector, production fell 0.4 percent, its first decline since April. Year-over-year growth in manufacturing production is up 3.8 percent. Meanwhile, manufacturers’ capacity utilization dropped from 75.6 percent to 75.3 percent for the month.
In terms of manufacturing production, eight sectors experienced gains, with eleven having declines. Both durable and nondurable goods production fell for the month, down 0.1 percent and 0.4 percent, respectively. The largest declines were in motor vehicles and parts (down 3.4 percent), electronic equipment, appliances and components (down 1.8 percent), wood products (down 1.7 percent), printing and support (down 1.3 percent) and apparel and leather (down 1.1 percent).
Despite the overall decline, some sectors experienced increased production in November. The largest gains were in aerospace and miscellaneous transportation (up 2.1 percent), primary metals (up 1.8 percent) and paper (up 1.1 percent). In addition, overall production levels are higher for the year, with durable goods production up 7.1 percent and nondurables up 1.3 percent since November 2010.
There have been improvements in the manufacturing sector and overall domestic economy in recent months, and yet, today’s industrial production numbers show that weaknesses remain. The decrease in motor vehicle production was the biggest story – assisted by supply issues resulting from floods in Thailand and other issues. Nonetheless, even with auto production is excluded, manufacturing output fell by 0.2 percent.
The larger forecast for industrial production moving into 2012 is a positive one, suggesting modest growth for the sector for the new year. Nonetheless, weaknesses persist in the marketplace, and a number of headwinds – including developments in Europe – perpetuate anxieties among businesses and the public. It will be important to adopt pro-growth policies to help boost production and U.S. economic activity so that we can move beyond these weaknesses.
Chad Moutray is chief economist, National Association of Manufacturers.