The Federal Reserve Board said that industrial production rose 0.8 percent in February, recovering from much weaker January data. The overall January production figure was revised to be unchanged. For manufacturers, production increased by 0.8 percent, an improvement from the decline of 0.3 percent the month before. On a year-over-year basis, manufacturing production has risen 2.0 percent, a slight pickup from the 1.7 percent pace observed in January. Manufacturing capacity also increased, rising from 77.8 percent to 78.3 percent.
Durable goods activity grew stronger than that of its nondurable goods sector counterparts, up 1.2 percent and 0.3 percent, respectively. The largest gainer was the motor vehicle sector, with a gain of 3.6 percent. The auto industry has seen its production rise 9.3 percent over the course of the past year, continuing its strong recovery and helping to boost the overall manufacturing and macroeconomic picture.
Other sectors with stronger growth in March included fabricated metal products (up 2.0 percent), furniture and related products (up 1.8 percent), machinery (up 1.7 percent), wood products (up 1.6 percent), nonmetallic mineral products (up 1.6 percent), and petroleum and coal products (up 1.4 percent). Reflecting the broad base of increases only three sectors experienced declines in production in February. These were primary metals (down 2.6 percent), printing and support (down 0.9 percent), and textile and product mills (down 0.4 percent).
Despite the good news of increased manufacturing activity, it is hard not to feel a bit underwhelmed by it all. Two percent growth in industrial production is certainly better than the alternative, but manufacturers really need to see much stronger growth in production in order for hiring and confidence to pick up and for the sector to once again produce outsized impacts on the macroeconomy. Note that this time last year, manufacturing production was growing at the 5.1 percent year-over-year pace.
Indeed, this was the thrust of much of NAM Chairman and CEO Jay Timmons’ keynote speech in Detroit last month. In it, he challenged policymakers to adopt pro-growth economic measures such that industrial production grew at an annual average of 4.5 percent or more, manufacturers added 20,000 net new workers each month on average, and real GDP rose at least by 3.5 percent annually. We can imagine the possibilities for manufacturers if this were to happen, with the sector adding about one million new workers in the next four years.
I say this not to pooh-pooh today’s decent industrial production numbers, which were positive and reflect a nice pickup in activity in February. But, it is important to remind ourselves that there is still much more work to be done for the economy to grow even stronger.