The Chicago Federal Reserve Bank said that its Midwest Manufacturing Index edged slightly higher in January. The index was up 0.1 percent in January to 97.0 from 96.8 in December. This was the third consecutive monthly increase (albeit a small one), and it continues a longer-term upward trend. Production in the Midwest has risen 6.4 percent over the past 12 months and 17.9 percent over the past 24 months, helping the sector recovery from significant declines in the Great Recession.
The rebound in the auto sector was largely responsible for much of these increases. Motor vehicle production rose 0.7 percent in January and 15.2 percent year-over-year. The Midwest Manufacturing Index tends to rise and fall largely on how the auto sector is performing, and strength in this sector has helped the Midwest outperform many of the other regions. The other sector to do well in January was machinery, which saw production increase 0.4 percent or 2.8 percent year-over-year.
Of course, it was not all good news. There were weaknesses in the resource and steel sectors in January, down 0.3 percent and 0.5 percent, respectively. These declines counteracted the strengths in the auto and machinery sectors. With that said, year-over-year gains in these two areas were 1.5 percent and 3.1 percent. Recent improvements in the U.S. economy and increases in overall production should allow these two sectors to experience growth in the coming months, however.
Chad Moutray is chief economist, National Association of Manufacturers.