August Manufacturing Output Shows Summer-time Drop That's Worst Since Winter 2014

Alan Tonelson |

The Federal Reserve's new August industrial production figures showed that real manufacturing output lost major momentum, as July's solid (0.89 percent) sequential increase was followed by a 0.49 percent decline that was the biggest since winter-affected January, 2014. Manufacturing's August woes were keyed by the biggest monthly fall-off in inflation-adjusted automotive production since April 2011. At the same time, the rest of industry remained mired in a technical recession, with its cumulative real output down since last November. And American manufacturing's real production level remains lower than at the outset of the Great Recession, back in December, 2007.

Here are the manufacturing highlights of the Federal Reserve's new release on August industrial production:

  • Inflation-adjusted manufacturing output fell on a monthly basis in August by 0.49 percent, the Federal Reserve's new industrial production figures reported – the worst such performance since the 0.80 percent drop in winter-affected January, 2014.
  • The August manufacturing drop-off was led by the newly volatile automotive sector. For the second straight year, a July monthly boom (upwardly revised from 10.56 percent to 10.59 percent) was followed by a major decline (6.44 percent). That drop was the sector's worst monthly performance since April, 2011 (-7.89 percent).
  • As with the year before, the most volatile sector within automotive was vehicles, where inflation-adjusted production sank by 9.13 percent over July levels. July real output had jumped by 15.98 percent, the most since September, 2009's 16.70 percent, during the current economic recovery's early stages.
  • Yet despite automotive's swings, the recent slump in the rest of industry continued in August, as non-automotive manufacturing production is still down on net in real terms since November – a nine-month stretch that technically qualifies as a recession.
  • With the August monthly downturn, total after-inflation U.S. manufacturing production is now 2.08 percent lower than its level when the last recession began – more than seven years ago (December, 2007).
  • Revisions to previous Fed manufacturing production readings were small but generally positive. July's initially reported monthly gain of 0.85 percent was revised up to 0.89 percent – the strongest since last November. June's 0.30 percent decline was revised up to a 0.13 percent dip, but May's 0.13 percent advance is now judged to be a 0.08 percent decrease, while April's 0.36 percent increase was re-pegged at 0.38 percent.
  • On a year-on-year basis, manufacturing's August real output increase of 1.65 percent trailed July's upwardly revised 1.82 percent and June's upwardly revised 1.74 percent. The August yearly gain was also the lowest since February, 2014's 0.85 percent (depressed by that harsh winter as well). In addition, it was much smaller than the 3.24 percent improvement from August, 2013 to August, 2014, though it bettered the previous August-to-August rise of 1.31 percent.
  • Automotive trends continued driving inflation-adjusted durable goods production in August. They fell by 0.87 percent on month – the biggest monthly slide since July 2013's 1.24 percent. In July, monthly durable goods output increased by a downwardly revised 1.17 percent in real terms
  • Thanks largely to the poor monthly performance, year-on-year durable goods production in August fell to a 1.29 percent gain after inflation – the worst since January, 2014's winter-affected 0.76 percent. Between August, 2013 and August, 2014, durable goods real output grew by fully 4.64 percent, while the comparable 2012-2013 production increase was 1.57 percent.
  • Inflation-adjusted durable goods production is now up 2.41 percent since the December, 2007 onset of the last recession.
  • Non-durables' real output decreased by a bare 0.03 percent on month in August, modestly reversing July's strong 0.58 percent upwardly revised increase.
  • On a year-on-year basis, inflation-adjusted non-durable goods output climbed in August by 2.06 percent – just slightly more slowly than July's upwardly revised 2.18 percent. The August yearly non-durables production improvement bested 2013-2014's 1.70 percent pace, and 2012-2013's 1.03 percent.
  • Non-durable goods production is still down by 6.73 percent after inflation since its pre-recession peak in July, 2007.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:


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