1955: Industrial Production

This post is part of the Bonddad  Economic History Project.  For more information, please see the right side of the blog

In 1955, the US was an island in the world.  Countries that would eventually become our international competitors were still rebuilding from WWII.  As such, the explosion in consumer demand was satiated by goods produced domestically.  Consider the following table of consumer goods:

US consumer demand was booming; US industry was the primary source of goods sold to US consumers.  As such, we see that overall industrial production rose for 1955:

The top chart shows that overall IP was at record levels in 1955.  The second chart shows that total mineral production was the first sector to hit multi-year highs.  But by the end of the year, durable, non-durable and total manufacturers production had reached multi-year levels.

The above table puts the charts into numerical perspective, as does the following excerpts from the Federal Reserves Annual Report and the Economic Report to the President, 1956.

Read More

1955: Industrial Production

The above FRED chart shows that industrial production grew throughout the year.  We see production increase in the first quarter, sow its rise in the second and third, and then continue to rise in the fourth.

The above chart from the ERP shows that both durable, minerals and non-durable manufacturing contributed to the rise.

Steel production rose for most of the year, while auto production saw a mid-year dip and a tailing off at year end.

The annual report of the Federal Reserve explains the industrial production situation like this:

Essentially, industrial production was the beneficiary of consumer demand.  As the US consumer wanted more and more "stuff" the industrial sector obliged with products.

Read More

1954: Industrial Production/Manufacturing

The above chart of industrial production from the FRED system shows that industrial production did not take off until the last quarter of the year.  There is a good reason for that.  Remember -- the reason for the slowdown was a systemic manufacturing situation.  Briefly, inventories built but demand did not.  As a result, there was a manufacturing recession where most of the lay-offs occurred in the manufacturing area.  The charts below help to fill in the gaps.

The above charts shows that the primary reason for the slowdown was the drop in durables goods manufacturing that started in 1953.

The above chart shows that inventories built at the end of 1953 and the inventory/sales ratio rose, peaking in early 1954.  As this ratio declined, industrial production came back on line, primarily starting in the fourth quarter of the year.

The lower chart shows shows that manufacturers placed more orders than there were sales for most of 1953 and 1954.  This is what caused the slowdown.  Remember that in 1954, there was no "just in time" inventory system; instead, businesses had to anticipate demand and place orders accordingly.  As such, inventory build-ups were far more common.

Read More

1950: Industrial Production

Below are excerpts from the 1951 Economic Report to the President on 1950's production.

In addition, here is the accompanying chart:

Read More

Industrial Production Drops .4%

From the Federal Reserve:

Industrial production decreased 0.4 percent in June after having fallen 1.2 percent in May. For the second quarter as a whole, output fell at an annual rate of 11.6 percent, a more moderate contraction than in the first quarter, when output fell 19.1 percent. Manufacturing output moved down 0.6 percent in June, with declines at both durable and nondurable goods producers. Outside of manufacturing, the output of mines fell 0.5 percent in June, and the output of utilities increased 0.8 percent. The rate of capacity utilization for total industry declined in June to 68.0 percent, a level 12.9 percentage points below its average for 1972-2008. Prior to the current recession, the low over the history of this series, which begins in 1967, was 70.9 percent in December 1982.

This is one set of statistics that still gives me the willies. Or -- to put it another way -- if there is anything that could screw up the bottoming process it's this series of numbers. Thankfully there are finally in a "less worse" situation.

Click for a larger image



Notice the following on the above chart:

1.) The monthly decline series has been improving in fits and starts for the last six months. However, it is still negative.

2.) The first quartet numbers were worse than the second quarter numbers (although both are still negative).

In addition, the charts are downright ugly still (click on all for a larger image):




The capacity utilization number indicates we're going to have a low investment total at the beginning of the next expansion as manufacturers ramp up existing production at the expense of new buildings/facilities etc...

Bottom line: if there is one series that really threatens a recovery this is it.

Read More

Industrial Production Blows

From the Fed:

Industrial production decreased 1.1 percent in May after having fallen a downward-revised 0.7 percent in April. The average decrease in industrial production during the first three months of the year was 1.6 percent. Manufacturing output moved down 1.0 percent in May with broad-based declines across industries. Outside of manufacturing, the output of mines dropped 2.1 percent, and the output of utilities fell 1.4 percent. At 95.8 percent of its 2002 average, overall industrial output in May was 13.4 percent below its year-earlier level. The rate of capacity utilization for total industry declined further in May to 68.3 percent, a level 12.6 percentage points below its average for 1972-2008. Prior to the current recession, the low over the history of this series, which begins in 1967, was 70.9 percent in December 1982.

If there is one figure that can blow the "things are getting better" argument it's the latest industrial production figure. Now -- the overall month to month chart is still encouraging (click on all images for a larger image):



Notice the rate of decline has decreased over the last six months save the current month. That means the current month could be a "blip" on the way to things getting better. But it also means we have to keep a very strong eye on all the industrial figures for the next few months. In addition, there has already been a ton of damage done to overall industrial production. Consider the following charts:



Notice that we've lost all production gains of the previous expansion. In addition



Utilization is at multi-decade lows. That means when the economy starts back up there is little incentive for business to engage in any capital expansion as their first priority will be to use the big slack in their production systems.

Again -- if there is a set of statistics that could really screw us up, this is it.

Read More

Industrial Production and Empire State Survey Show Increasing Weakness

From the WSJ:

The Federal Reserve reported that industrial production fell 0.5% in February after rising 0.1% in January. "The industrial sector remains in recession," said Daniel Meckstroth, chief economist of the Manufacturers Alliance/MAPI trade group.

In a separate report, the Fed's New York district bank said its Empire State manufacturing survey stood at minus 22.23 in March, down from minus 11.72 in February. The previous low was minus 19.6, in November 2001. "New York manufacturing is rapidly slowing and the record-low measure of activity makes it clear the economy is in trouble," said Joel Naroff, president of Naroff Economic Advisors.

On the chart notice the year-over-year change in production was pretty even from about April 2007 to last month. Yesterday's figure moves the number lower in a big way. As mentioned below, one month does not a trend make.

In Fed's industrial production index is a very broad measure of production. It includes everything made or consumed in the US. Note the broad nature of the decreases:

The production of consumer goods decreased 0.6 percent in February with declines in the production of both consumer durables and consumer nondurables.

The output of business equipment edged up 0.1 percent in February, as an increase in information processing equipment outweighed decreases both in transit equipment and in industrial and other equipment.

The output of defense and space equipment declined 0.3 percent in February after having increased 1.0 percent in January.

The output of construction supplies fell 0.8 percent in February after having decreased 0.6 percent in January; the level of production in February was nearly 1 percent below its year-earlier level and 5.2 percent below its peak in 2006. The output of business supplies declined 1.1 percent in February.

The production of materials fell 0.5 percent in February after having changed little in January.

As for the New York Fed, their report was not encouraging:

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers deteriorated further in March. The general business conditions index fell another 10½ points to -22.2, a reading that eclipsed the record-low of -19.6 set in November 2001. Although the new orders index rose modestly, the shipments index edged down, and both remained in negative territory. The prices paid index rose for the third consecutive month, reaching its highest level since mid-2006, but the prices received index declined. Employment indexes remained close to zero. Future indexes were generally positive and up slightly for the month, but still well below levels of late last year. However, the future employment indexes rebounded noticeably after falling steeply in February.

And here's the chart:



That's gonna leave a mark.

Read More

Empire State Survey Pretty Good; Industrial Production Up

From the NY Fed:

The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to improve in August. The general business conditions index held steady at 25.1.

The new orders and shipments indexes remained at similarly high levels, while the unfilled orders index continued to hover near zero. The prices paid index also remained essentially unchanged, while the prices received index fell to its lowest level in two years. Employment indexes were positive and above their July readings. Future indexes conveyed steady optimism, although the future shipments index turned sharply lower. While positive, future price indexes fell, as did the capital spending and technology spending indexes.

Here's the accompanying chart.



From the Federal Reserve:

Industrial production rose 0.3 percent in July after an increase of 0.6 percent in June. At 113.9 percent of its 2002 average, total industrial production in July was 1.4 percent above its year-earlier level. In July, manufacturing output moved up 0.6 percent and mining output advanced 0.7 percent, but the output of utilities fell 2.1 percent. Capacity utilization for total industry edged up to 81.9 percent, a rate 0.5 percentage point below the level in July 2006 but 0.9 percentage point above its 1972-2006 average.

....

Manufacturing output rose 0.6 percent in July, as production of both durable and nondurable goods increased. The increase in manufacturing followed a similarly sized gain in June. The production of durable goods rose 0.9 percent in July, and gains were widespread across components. The production of nondurable goods rose 0.3 percent, after a gain of 0.4 percent in June. Substantial advances in July occurred in paper, petroleum and coal products, and chemicals. However, the output indexes for textile and product mills, apparel and leather products, and plastics and rubber products all declined. The output of the non-NAICS manufacturing industries (logging and publishing) rose 0.8 percent. The factory operating rate advanced 0.3 percentage point, to 80.7 percent, a rate about 1 percentage point above its 1972-2006 average.

However, the year-over-year change has been declining for a bit:



Both of these are welcome reports considering the overall market tenor of the last 3-4 weeks. Manufacturing continues to be a bright spot in the economy. My guess is the very low position of the dollar has a lot to do with this.

Read More

Industrial Production Up

From the Federal Reserve:

Industrial production rose 0.5 percent in June after a decrease of 0.1 percent in May. At 113.4 percent of its 2002 average in June, total industrial production was 1.4 percent above its year-earlier level. Manufacturing output moved up 0.6 percent in June; excluding motor vehicles and parts, factory output increased 0.4 percent after having been unchanged in May. In June, the output indexes for mining and utilities registered gains of 0.5 percent and 0.3 percent respectively. For the second quarter as a whole, total industrial production advanced at an annual rate of 2.9 percent after an increase of 1.1 percent in the first quarter. Capacity utilization for total industry moved up to 81.7 percent in June; the rate was 0.6 percentage point below its level in June 2006 but 0.7 percentage point above its 1972-2006 average.

This jibes with yesterday's Empire State manufacturing report, which showed gains as well.

There were increases across the board: consumer goods, business equipment and construction all saw gains. Business equipment is up 3.4% Y/Y. However:

The index for business equipment was unchanged in June for a second consecutive month, but it advanced at an annual rate of 3.6 percent in the second quarter

Automotive production is ramping up:

After little change in the first quarter, the production of automotive products surged at an annual rate of 20.7 percent in the second quarter.

The housing slowdown is clearly having an effect:

The output of home electronics recovered 2.6 percent in June after a decline of the same amount in May. The index for appliances, furniture, and carpeting fell 0.5 percent in June; production increased at an annual rate of 0.8 percent in the second quarter after declines in each of the preceding six quarters.

One of the central themes of the bull's argument going forward is an increase in manufacturing capacity and activity. So far this month, we are getting a decent confirmation of that trend.

Read More

Industrial Production Increases

From the Federal Reserve:

Industrial production increased 0.7 percent in April after a decrease of 0.3 percent in March. Output in the manufacturing sector moved up 0.5 percent in April; the increase was led by advances in motor vehicles and parts and in high-technology goods. The output of utilities increased 3.5 percent; temperatures were relatively warm in March but fell below seasonal norms in April. Mining output decreased 0.3 percent in April. At 113.0 percent of its 2002 average, overall industrial production for April was 1.9 percent above its year-earlier level. The rate of capacity utilization for total industry rose 0.4 percentage point, to 81.6 percent, a level 0.6 percentage point above its 1972-2006 average.

Final production of consumer goods and business equipment increased .9%.

Manufacturing increased .5%

The report continued with these strong points:

All major market groups recorded increases in April. The output of consumer goods rebounded 0.9 percent after having fallen 0.8 percent in March. Production of consumer durables expanded 2.1 percent in April. Apart from the strength in automotive products, the output of home electronics climbed 4.8 percent because of gains in computers produced for households and in audio and video equipment. Also within consumer durables, the indexes for appliances, furniture, and carpeting and for miscellaneous goods increased. Within consumer nondurables, the output of non-energy goods edged up 0.2 percent, as a decline in foods and tobacco was more than offset by increases in clothing, in chemical products, and in paper products. Among consumer energy products, an increase in residential sales by utilities outweighed a decline in the output of fuels.

The output of business equipment moved up for a third consecutive month in April; an increase of 0.9 percent was led by gains in transit equipment and in information processing equipment. The rise of 1.9 percent in transit equipment was supported by increases in truck production and continued strength in civilian aircraft. Information processing equipment rose 0.9 percent because of output gains in electromedical equipment and in computers produced for businesses. The output of defense and space equipment rose 1.0 percent after having decreased 2.3 percent in March; this increase reflected a return to work in April at a shipyard affected by a recent strike. The output of construction supplies increased 0.4 percent in April. The output of business supplies advanced 0.7 percent because of strength in the production of medical supplies and in commercial sales of gas and electricity.

The production of materials moved up 0.6 percent in April, as gains in both durable and energy materials outweighed a decline in nondurable materials. Within durables, the output of equipment parts rose 1.3 percent; the output of semiconductors advanced for a second consecutive month. The output of consumer parts also increased 1.3 percent; the rise was boosted by increases in the indexes related to motor vehicle parts and steel. The production of other durables increased 0.5 percent. Within nondurable materials, the production of both textiles and chemicals fell, while the output of paper materials remained unchanged. The production of energy materials recovered 0.8 percent in April after having declined 2.4 percent in March.

Short version -- this is a damn good report.

Read More

Industrial Production Ramps Up

From the Federal Reserve:

Industrial production increased 1.0 percent in February after a decrease of 0.3 percent in January and a rise of 0.8 percent in December. Output in the manufacturing sector gained 0.4 percent in February and was led by increases in motor vehicles and in high-technology goods. The output of utilities jumped 6.7 percent in February, as colder-than-average temperatures boosted production at both electric and natural gas utilities. The output of mines edged up 0.1 percent. At 113.1 percent of its 2002 average, overall industrial production for the month was 3.4 percent above its year-earlier level. The rate of capacity utilization for total industry in February rose 0.6 percentage point, to 82.0 percent, a level 1.0 percentage point above its 1972-2006 average.

The big increase came in consumer goods which increased a very large 1.5%, and utilities which increased 6.7%.

We've been getting a mixed signal from the industrial/manufacturing statistics for the last few months. The regional Fed surveys have been mixed, the ISM is hovering around neutral, yet the industrial production number jumped a pretty large 1% in March.

It's important to remember this jump was in two areas, one of which (utilities) can be attributed to weather related issues. In addition, the downward GDP revision from earlier this month was attributed to a technical inventory issue. Commentators noted because of the downward revision in inventories industrial production would have to increase. It appears that is happening.

Read More

Chrysler Cuts Production: Industrial Production to Follow?

From the AP

The Chrysler Group, which had an operating loss of $1.475 billion in 2006 and expects to show losses through 2007, announced Wednesday that it would eliminate 13,000 positions, including 11,000 production jobs and 2,000 white-collar posts, as it seeks to cut costs and return to profitability in 2008.

Of the production job cuts, 9,000 are in the U.S. and 2,000 are in Canada.

Chrysler, part of Germany-based DaimlerChrysler AG, said Wednesday it plans to close the Newark, Del., assembly plant during the next two years and cut shifts at plants in Warren, Mich., and St. Louis. The company also announced that a parts distribution center which employs 100 workers near Cleveland also will close this year.

On Thursday, company officials said much of the impact would be in southeastern Michigan, where 5,300 people will lose their jobs by 2009.

Yesterday, the Fed released the January Industrial production numbers. They decreased by .5%, largely caused by a big drop in auto production. This plan will go into effect throughout 2007 and probably into 2008. This means another US automaker is scaling back production. Don't be surprised if this hits the industrial production numbers going forward.

I should also add the Ford (F), GM (GM) and Daimler Chrysler (DCX) stocks have all rallied over the last few months, probably in anticipation of these plans working. I have been wondering if these rallies were warranted given the underlying problems of these three companies.

Read More

Industrial Production Drops .5%

From the Federal Reserve:

Industrial production decreased 0.5 percent in January after an increase of 0.5 percent in December. Output in the manufacturing sector declined 0.7 percent in January; about one-half of the decrease was a result of a drop of 6 percent in motor vehicles and parts. The output of utilities rebounded 2.3 percent, as temperatures moved back toward seasonal norms, while the output of mines moved down 1.2 percent. At 111.9 percent of its 2002 average, overall industrial output for the month was 2.6 percent above its January 2006 level. The rate of capacity utilization in January fell 0.6 percentage point, to 81.2 percent. Even so, it was 0.1 percentage point above its year-earlier level and 0.2 percentage point above its 1972-2006 average.

OK -- let's break these numbers down a bit.

1.) Auto production accounted for half of the decline. That means we have a 1-time factor disproportionately hitting this number. While the decrease still means something important for this number, it's doubtful we'll see auto production drop that much again in the near future. The drop occurred in autos and trucks. Even without the auto numbers, overall production decreased .2%.

2.) Energy products increased in production. While the 4th quarter still saw a big drop, this large increase may bode well for this sector in the future.

3.) Computers, semi-conductors and communication equipment all saw increases. Excluding high-tech, non0energy production decreased 1.1%. That indicates technology production is really important to the industrial base right now and negative news from that sector will be doubly important.

4.) Industrial capacity decreased in a big way. This should help the Fed continue t argue that inflationary pressures are lessening.

Read More

Industrial Production Increases .4%

From CBSMarketwatch.com

U.S. industrial production rose by an overall 0.4% in December, as the high-technology and motor-vehicle industries posted strong output for the month, the Federal Reserve said Wednesday.

....

Bear Stearns economists said that, coupled with other recent data, the industrial output figure showed the economy improved at the end of the year.

"Data on employment, retail sales, and production suggest that the economy's momentum was picking up at the end of 2006," the economists wrote in a research note.

Let's look inside the report, because there are two sides to analyze.

Overall industrial production decreased -.3%, -.1% and -.1% in September through November, respectively. That means the overall .4% look like a rebound.

On a monthly basis there are lots of increases -- consumer durables and non-durables, business equipment (which saw a big bump), durable and nondurable manufacturing and mining all saw increases. These increases should give the market some confidence going forward because they occurred across a wide spectrum of industrial areas.

I should note that last months manufacturing ISM saw increases as well, although the index was hovering around 50 which is the line between expansion and contraction.

However, overall industrial production fell at a -.5% rate in the fourth quarter. The second lowest annual growth rate occurred in the third quarter at 4%. In other words, the fourth quarter saw an overall downturn. All industrial areas - manufacturing, consumer goods, energy, business goods -- saw low numbers on a quarterly basis. Manufacturing contracted -1.4% on an annual basis in the 4th quarter.

The breadth of this month's increases is a good sign. However, another month of increases is required before we pop the champaign corks.

Read More