The Federal Reserve Board said that industrial production was unchanged in May, with manufacturing activity up 0.1 percent. So far in 2013, manufacturing production has been virtually unchanged, up in two months and down in three. On a year-over-year basis, manufacturers have increased their output by 1.7 percent. That is far from ideal, as we would like to see production increase by at least double that to signify a flourishing manufacturing sector. Nonetheless, it is indicative of many of the weaknesses that we are seeing right now in the sector.
At the same time, manufacturing capacity utilization remained at 75.8 percent, which while the same as April’s figure represented a slowdown from the 76.4 percent utilization rate of December.
Both durable and nondurable goods production were up slightly in May, increasing 0.2 percent and 0.1 percent, respectively. Manufacturing activity gained the most in the month in the apparel and leather (up 3.1 percent), computer and electronic products (up 1.1 percent), wood products (up 1.1 percent), petroleum and coal products (up 0.9 percent), plastics and rubber products (up 0.9 percent), nonmetallic mineral products (up 0.8 percent), and motor vehicle (up 0.7 percent) sectors.
These increases were somewhat offset, though, by declines in primary metals (down 1.0 percent), furniture (down 0.8 percent), aerospace and miscellaneous transportation (down 0.6 percent), machinery (down 0.4 percent), and food and beverage (down 0.3 percent) sectors.
The industrial production numbers confirm that manufacturing growth has been quite weak in the early months of 2013. Manufacturing export numbers have been soft, with domestic demand dampened by higher taxes and across-the-board spending cuts. The NAM/IndustryWeek Survey of Manufacturers, which was released earlier in the week, predicts that the year-over-year pace of production activity will increase to 2.8 percent by the fourth quarter of 2013. For that to be true, production will need to pick up. With this in mind, 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.
Chad Moutray is the chief economist, National Association of Manufacturers.