The Federal Reserve reported that industrial production was up 0.9 percent in July, building on the gains in May and June. On a year-over-year basis, industrial production has increased 3.7 percent. Likewise, manufacturing production rose 0.6 percent in July, after growing by 0.2 percent in each of the previous two months. Manufacturers’ capacity utilization also edged higher in July by 0.2 percent.

This report shows that manufacturing production is starting the third quarter off much stronger than it did the second quarter. Leading the charge is the motor vehicle sector. In fact, if you were to exclude the motor vehicle sector, manufacturing production would have risen just 0.3 percent. This is yet another sign that the automotive sector is beginning to recover from its supply chain challenges of the spring that resulted from the Japanese earthquake and subsequent tsunami. However, while the rest of the industry is experiencing gains, they continue to be modest.

Looking at specific industry groups within manufacturing, all but 4 of the 19 sectors experienced gains – a sign that the increased production was relatively broad-based. The sectors with the strongest monthly increases include: motor vehicles and parts (up 5.2 percent), primary metals (up 1.7 percent), aerospace and miscellaneous transportation equipment (up 1.3 percent) and plastics and rubber products (up 1.1 percent).

The largest declines were in electrical equipment, appliances and components (down 2.3 percent) and apparel and leather (down 1.8 percent). Production in durable goods rose 1 percent for the month and 6.6 percent for the year; whereas, nondurables rose 0.3 percent and 1.7 percent, respectively.

It is notable that this survey comes on the heels of the downbeat Empire State Manufacturing Survey released yesterday. That report from the New York Federal Reserve Bank seemed to echo the sentiment of many others by reporting a manufacturing sector with fewer new orders and less production. Let’s hope that today’s industrial production figures bode well for future growth.

Chad Moutray is chief economist, National Association of Manufacturers.

The Federal Reserve reported that industrial production was up 0.2 percent in June, reversing two months of declines. Manufacturing production was unchanged from May, with a year-over-year increase of 3.7 percent. Excluding motor vehicles and parts, manufacturing production would have risen 0.2 percent. Manufacturers’ capacity utilization figures were also unchanged.

In June, the production of nondurable goods was up 0.1 percent, while durables were flat. Over the past year, however, durable goods production (up 6.8 percent) has outstripped nondurables (up 1.4 percent). The largest monthly gainers were primary metals (up 1.6 percent), miscellaneous manufacturing (up 0.9 percent), and petroleum and coal products (up 0.8 percent). Motor vehicle and parts production was down 2.0 percent, reflecting continued supply disruptions due to the Japanese disaster earlier this year. Other decliners included furniture and related products (down 2.1 percent), wood products (down 1.2 percent), and printing and support (down 1.0 percent).

Overall, these numbers show an economy the struggled mightily in the second quarter of 2011.  Other measures of manufacturing activity, such as the ISM purchasing managers’ index and some of the regional Federal Reserve Bank surveys, have been more upbeat on the latest statistics. This survey, while positive, finds that some of the challenges faced in March, April, and May – such as the supply-chain disruptions stemming from the Japanese disaster – persist. Indeed, ten of the major manufacturing industries experienced declines in production this month, compared to nine that saw increases.

While I continue to be optimistic about the third and fourth quarters of this year, it is definitely a cautious optimism.

The Federal Reserve reported that industrial production was up 0.1 percent in May, up from being flat in April. Manufacturing production was up 0.4 percent, reversing a decline in the previous month, with a year-over-year increase of 3.7 percent. Manufacturers’ capacity utilization figures were up from 74.2 to 74.5, mirroring the industrial production trend.

Durable goods production increases have outstripped nondurables over the past year (up 6.7 percent and 1.4 percent, respectively). In May, the strongest gainers were furniture and related products (up 2.6 percent), petroleum and coal products (up 2.0 percent), nonmetallic mineral products (up 1.8 percent), machinery (up 1.7 percent), computer and electronic products (up 1.4 percent), and textile and product mills (up 1.4 percent). Motor vehicle and parts production was down 1.5 percent, reflecting continued supply disruptions due to the Japanese disaster earlier this year; however, this was an improvement from the 6.5 percent drop in April.

Meanwhile, the Empire State Manufacturing Survey from the Federal Reserve Bank of New York found that manufacturing output fell in its June survey, with the index for overall business conditions falling below zero to -7.8. New orders and shipments were down dramatically. In a series of special questions, 41 percent of respondents expected their workforce to increase over the course of the next year, which was down from a similar set of questions posed in January.

In general, the survey suggests that manufacturers in New York have a positive viewpoint of future business conditions, new orders, shipments and employment, but the indices for each of these has fallen over the past few months, suggesting deterioration in overall optimism. (continue reading…)

Much of the economic data over the past couple weeks have shown manufacturing cooling somewhat in April, after strong growth in previous months. Today’s report from the Federal Reserve Board on industrial production mirrors this finding. While total industrial production was unchanged, manufacturing production fell 0.4 percent in April. Year-over-year growth in manufacturing production was 4.6 percent, reflecting the strong increases from previous months.

Prior to this month’s decline, the index had risen for nine consecutive months. Manufacturers’ capacity utilization figures also dropped in April from 74.8 to 74.4.  Supply disruptions due to the Japanese earthquake and subsequent tsunami were one of the main reasons for the decline in April. Excluding the auto sector, industrial production actually rose 0.2 percent. (continue reading…)

After edging down 0.2 percent in September, the Federal Reserve reported today that industrial production was flat in October. A 0.6-percent rise in manufacturing production was offset by declines in mining and utilities production. Following very sluggish growth during the past several months, the October increase in manufacturing production was primarily due to two factors.

First, the recent upturn in housing activity fueled increases in the production of wood products, nonmetallic minerals and electrical equipment and appliances, all of which posted healthy production gains in excess of 2 percent last month. 

Second, continued growth in business investment and exports drove noticeable upturns in the production of machinery, computers and electronic products in October. This is a positive sign that businesses are now replacing equipment that has become outdated — actions that were likely delayed during the recession. At the same time, with over half of the growth in machinery output driven by sales abroad over the past year, today’s report is good news on the export front. Solid growth in exports over the past year has been one component of the recovery that has outperformed most prior recoveries and one of the main reasons manufacturing has been outpacing the overall recovery.

One area of weakness continues to be consumer-related. The production of consumer goods was flat in October after declining each of the prior two months. Retail inventory-to-sales ratios have increased in recent months to their highest levels since last October. As retailers reduce excess inventory stocks, this will likely curtail both production and imports of consumer goods over the next several months.

After six consecutive monthly increases, the Federal Reserve reported today that industrial production fell by 0.2 percent in September, the largest decrease since May 2009.

Making up 72 percent of overall industrial production, the overall decline was mainly caused by a 0.1 percent fall in manufacturing production in September.  And for the third quarter overall, manufacturing production only increased at an annual rate of 4 percent, less than half the 8.7 percent pace achieved during the prior four quarters. 

The fact that the September decline in manufacturing production came right after a sharp deceleration from 0.7 percent growth in July to 0.2 percent growth in August is a concerning sign that even though manufacturing continued to recover last quarter, it has lost steam over the last three months ending in September. The drop in manufacturing production last month was mainly due to a 0.2 percent drop in durable goods industries, which more than offset a modest 0.1 percent increase in the nondurable goods sector.

Within durable goods, the drop in output was very diffuse, with eight of the eleven major manufacturing industries posting declines.  The industry declines ranged from capital goods such as machinery, aerospace, computers and electrical equipment to supplies such as wood products, furniture, fabricated metals and primary metals.  For half of these industries, this was the second consecutive monthly decline.

With most of the fiscal stimulus and inventory rebuild now in the past, today’s report adds to the mounting evidence that the manufacturing recovery has decelerated significantly from the robust growth achieved earlier in the year.  And with increased business uncertainty building due to possible policy changes from Washington, lawmakers should take note of today’s report and pause before enacting any measures that would undercut the economic recovery, which clearly is weakening.

More reporting and commentary sparked by the Federal Reserve’s latest monthly report on industrial production, including a good piece in CNNMoney, “Rebound on the factory floor“:

Dave Huether, chief economist for the National Association of Manufacturers, agrees with Zandi that U.S. manufacturers have a relatively bright outlook.

He said the sector is far better positioned today than it was at the end of the previous recession in late 2001, due partly to the lower value of the dollar, which remains relatively weak against other currencies despite a rally this year.

Huether believes that manufacturers could start to hire significant numbers of workers later this year, and that job growth will continue all the way through 2012. He is predicting a million new manufacturing jobs in the next few years. There hasn’t been an annual net gain in jobs since 1997.

“Will we get all the jobs back? Probably not. But we’ll do better than in the last recovery when we really didn’t see any job growth,” Huether said.

AP has a useful box, “Industrial Production at a Glance.” The Fed’s news release is here. Earlier Shopfloor post, “Positive Portents.”

UPDATE (10:28 a.m.): “Jobs claims rise unexpectedly.” Just a week’s report, but still.

Wall Street Journal, “Factories Get Set to Hire“:

Manufacturers are seeing more signs that the U.S. economic recovery is on a solid footing, opening the way for new hiring as well as call-backs for factory workers laid off during the depths of the recession.

Caterpillar Inc., the Peoria, Ill.-based heavy-equipment maker, has brought back 600 workers in the past 60 days, including 100 recalled to an engine plant in Indiana last week. Allen Edmonds Shoe Corp. has been relying on overtime to meet growing demand, but is now preparing to start adding new workers at its U.S. plants in coming weeks.

The Federal Reserve said Wednesday that industrial production, which includes utility and mining output, as well as manufacturing, rose 0.9% in January, the seventh straight monthly increase. Factory output rose a solid 1%, with improvement across a wide range of industries, including apparel and appliances. Output of motor vehicles and parts was particularly strong, rising 4.9%, which economists attributed to pent-up demand and government incentives that fueled traffic to dealers.

From informal conversations with NAM member companies, we do get a sense that employers are starting to consider the possibility of being hopeful in the recovery. David Huether, the NAM’s chief economist, commented on the latest Federal Reserve’s industrial production numbers on Wednesday, “While recent signs are encouraging, the recovery is unlikely to be sustainable at this rapid pace as much of it was driven by short-term inventory and one-time government spending.”

The Fed’s news release is here.

• Associated Press, “Economic recovery showing endurance“
• Bloomberg, “Industrial Production in U.S. Rose 0.9% in January“
• Inside Indiana Business, “CAT Recalls About 100 Workers“

Manufacturing output surged by 1 percent in January the Federal Reserve reported today – the fastest pace in five months — due in large part to temporary boosts from inventory rebuilding and the extension of the homebuyer’s tax credit. Of the 19 major manufacturing industries, 16 posted production gains last month, signaling that the manufacturing recovery is broadening. While recent signs are encouraging, the recovery is unlikely to be sustainable at this rapid pace as much of it was driven by short-term inventory and one-time government spending.

A more durable source for growth has been the global economic recovery which, combined with a competitive dollar, is powering export growth in manufactured products. The current export surge stands in stark contrast to the early stages of the last recovery in 2002, when sluggish growth abroad and an overvalued dollar conspired to depress export growth until the middle of 2003. With global conditions improving, the time is ripe for Congress to pass a number of free trade agreements that would break down more barriers for U.S. exports and create jobs.

Looking ahead, the strength and durability of the manufacturing recovery will depend on the global competitiveness of U.S. companies.

Manufacturing activity was flat in December as improvements are still not hitting the broad range of industrial sectors. December’s solid 0.6 rise in industrial production reported by the Federal Reserve today was driven mainly by unseasonably cold temperatures, which spurred the largest monthly gain in utility output in two decades. Still, manufacturing production in the fourth quarter rose at an annual rate of 6.1 percent due to earlier gains in November.

The past year was definitely one of transition for manufacturers. After declining at an annual rate of 15 percent in the first half of 2009, production rose at a 7.8 percent annual pace in the last six months. Overall, manufacturing production was down 4.4 percent in 2009, cutting in half the 2008 decline of 8.7 percent.

While the overall manufacturing production numbers appear promising, a closer look reveals that improvements in the second half of 2009 have not yet spread throughout America’s industrial base. Production gains in both the third and fourth quarters took place in only nine of the 19 major manufacturing industries, so the bulk of manufacturers are still struggling.

Looking ahead, results of the 4th quarter NAM/IndustryWeek Manufacturing Index — a quarterly survey of NAM member companies –signal a probable slow down in the manufacturing recovery. In fact, roughly half (52 percent) of the respondents to the fourth quarter survey expect that downturns in their company’s production will extend into the second half of 2010. The full results of the 4th Quarter NAM/IndustryWeek Manufacturing Index are posted at: http://www.industryweek.com/Econinsight/