Thursday, August 17, 2023

Industrial production improves, with help from vehicle production: travelin’ man edition


 - by New Deal democrat

Industrial production increased 1.0% in July. Its manufacturing component increased 0.5%. Total production is still down -0.6% from its peak last autumn, while manufacturing is down -01.%:

These are not recessionary numbers. 

It’s worth emphasizing that the unspooling of pandemic related bottlenecks is significantly affecting these numbers. Below I show total manufacturing (black), manufacturing except for motor vehicles (blue), and vehicle manufacturing (red), all normed to 100 as of just before the pandemic:

Production of motor vehicles and parts is up about 10% this year. Were it not for that, manufacturing production would be down further.

Also, here is production of wood products, which has been tracking housing construction, and like construction has also had a little bit of a rebound this year:

This by the way shows an important difference between this metric and the ISM manufacturing index and Fed new orders indexes. The former is weighted by contribution, whereas the latter are diffusion indexes. The two types of indexes are telling us that while the bulk of manufacturing is down significantly, the ramping up of vehicle production is counterbalancing that.