The Chicago Federal Reserve Bank said that manufacturing activity rebounded in August, after slowing in July. The Midwest Manufacturing Index (MMI) increased 1.5 percent from 95.4 in July in 96.7 in August. This index is heavily influenced by the auto sector, and as we seen in recent national jobs and production data, motor vehicle production picked up in August after retooling in July for the new model year. Indeed, auto output in the MMI declined 2.8 percent in July, but was up 4.1 percent in August. On a year-over-year basis, motor vehicle production in the district has risen 8.4 percent.
The recovery in the auto sector has helped to make the Chicago Fed district one of the stronger regions in the country. Over the past 12 months, the MMI has increased 4.0 percent, better than the 2.8 percent pace observed nationally for the manufacturing sector (NAICS). Moreover, the MMI has grown 14.0 percent and 21.8 percent over the past 2 and 3 years, respectively. This compares to 6.6 percent and 9.4 percent growth over the same time period for U.S. manufacturing production.
Outside of motor vehicles, output in the machinery (up 0.8 percent) and resource (up 0.4 percent) sectors were both higher. Components of the resource sector, according to the Chicago Fed, include food, wood products, paper, chemicals, and nonmetallic mineral products. Machinery recovered from softness in July; whereas, resource sector activity grew at the same pace, which was accelerated from June’s 0.1 percent growth rate. The two sectors have grown a modest 1.5 percent and 1.9 percent, respectively, over the past year.
The steel sector was the lone holdout in the MMI for August, down 0.1 percent. Yet, it had been the bright spot in July, having increased 1.3 percent while the other three components were down. Year-over-year growth for steel was 2.2 percent, with metals benefitting from higher auto and machinery sector activity.
Chad Moutray is the chief economist, National Association of Manufacturers.
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