Manufacturing Production Declines for the Third Time in the Past Four Months

By May 15, 2013Economy

The Federal Reserve Board said that industrial production declined 0.5 percent in April, more than double the consensus expectation of 0.2 percent. For manufacturers, production activity fell 0.4 percent in April, after a 0.3 decrease in March. This was the third time so far in 2013 that manufacturing production has contracted, decelerating the year-over-year pace from 2.4 percent growth in December to 1.3 percent in April.

Manufacturing capacity has also fallen, down from 78.3 percent in March to 77.8 percent in April. This brings the utilization rate back to where it was at year’s end, erasing the capacity gains seen in the first four months of 2013.

Durable goods production fell 0.4 percent; whereas, production in the nondurable goods industries fell 0.1 percent. Declining levels of manufacturing activity were mostly across-the-board, with only four of the 19 major sectors experiencing a gain for the month. The four sectors with higher production in the month were plastics and rubber products (up 0.4 percent), chemicals (up 0.2 percent), computer and electronic products (up 0.2 percent), and food and beverages (up 0.2 percent).

The largest declines were seen in the nonmetallic mineral products (down 1.7 percent), apparel and leather (down 1.6 percent), petroleum and coal products (down 1.5 percent), motor vehicle and parts (down 1.3 percent), and miscellaneous durable goods (down 1.1 percent) sectors.

When combined with Empire State Manufacturing Survey data out this morning, we get a true sense of just the sluggishness of growth for the sector right now. With exports that are barely growing and domestic sales softened by higher payroll taxes, it is clear that the manufacturing sector has still not emerged from pullback in activity that we began to see in the second half of last year. Uncertainties about the economy and the impact of government budget cuts continue to persist, preventing manufacturers from making large gains to output and employment.

It will be important for policymakers to implement pro-growth policies that provide a boost to output and orders that the sector is yearning for. Annual growth in manufacturing production of just 1.3 percent is insufficient, and such low rates of industrial growth are not enough to help boost hiring and output.

Ideally, we would like to see annual industrial production growth of 4.5 percent or greater, and if such rates were met regularly, many of the economic challenges that we continue to struggle with would start to ease significantly.

Chad Moutray is chief economist, National Association of Manufacturers.


Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

Join the discussion One Comment

  • Tom says:

    Manufacturing jobs keep getting shipped overseas and Americans seems shocked that there’s a decline?
    I wish I was alive back when America lead the world in manufacturing jobs and folks were proud to purchase items made in America!

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