The Federal Reserve Board reported that industrial production rose 0.3 percent in December, somewhat slower than the 1.0 percent gain in November. Much of the growth in November could be explained by production ramping back up after slowdowns from Hurricane Sandy.

The pace of growth in December illustrates that the economy is beginning to recover from its mid-year doldrums. This was especially true for in the manufacturing and mining sectors, which were up 0.8 percent and 0.6 percent in December. Production in utilities was down 4.8 percent for the month.

The good news for manufacturers was that the gains in December were fairly broad-based, with 15 of the 19 major sectors experiencing gains. Both durable and nondurable goods sectors were higher, up 1.0 percent and 0.6 percent. Of particular note, there were strong increases in the primary metals (up 2.9 percent), motor vehicles (up 2.6 percent), apparel and leather (up 1.9 percent), computers and electronics (up 1.5 percent), chemicals (up 1.4 percent), and printing and support (up 1.3 percent) sectors.

Declining production for the month was found in the electrical equipment and appliances (down 1.7 percent), textile and product mills (down 1.6 percent), nonmetallic mineral products (down 1.2 percent), and paper (down 0.4 percent).

Given that this was the last data point for 2012, it is also instructive to look at which sectors had the fastest gains in production for the year as a whole. The largest gainer was the motor vehicle sector, which experienced a 17.2 percent increase in production in 2012. To show just how much this sector has recovered since the recession, production has increased 54.6 percent over the course of the past three years (2010 to 2012). Other notable sectors for the year include:

  • Miscellaneous manufacturing, up 11.6 percent
  • Electrical equipment and appliances, up 5.5 percent
  • Wood products, up 5.5 percent
  • Aerospace and other miscellaneous transportation, up 4.8 percent
  • Fabricated metal products, up 4.5 percent
  • Plastics and rubber products, up 4.3 percent

These data illustrate some progress in the manufacturing sector in the last two months of the year. Given many of the headwinds in the global and domestic economic environment, this is definitely positive movement. With that said, industrial production rose a scant 2.2 percent over the course of 2012, and it was up just 0.8 percent in the second half of the year. Clearly, the uncertainties in the marketplace took a toll on production during the course of the year, especially in the later months.

Moving forward, some of these uncertainties were alleviated with the fiscal cliff deal, but with continuing talk about the debt ceiling and with long-term fiscal challenges not dealt with, manufacturers remain focused on what policymakers might do. Industrial production is expected to rise just one to two percent in 2013, necessitating the dialogue in Washington to once again concentrate on pro-growth strategies, even as they tackle on and move on from their budgetary woes.

Chad Moutray is chief economist, National Association of Manufacturers.

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