New Fed Manufacturig Data Show US Automotive Slump Continues & Durables in Recession

Alan Tonelson |

Inflation-adjusted manufacturing output rose month-to-month in January (0.49 percent) by its greatest sequential amount since last July (one percent) but revisions back to October were all downgrades. Largely as a result, domestic industry remained on the verge of a technical recession (six months or more of cumulative real production decline). The automotive sector that has led manufacturing's recovery-era rebound saw real production jump by 2.84 percent – also the best since July – but remains in technical recession, and the durable goods super-sector fell into one. Fed revisions also cut the annual 2015 manufacturing output gain after inflation to 0.49 percent – barely half the rate previously reported and the weakest increase since the last recession. Constant dollar manufacturing output still remains 1.27 percent lower than at the outset of that downturn – more than eight years ago.

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

>Inflation-adjusted manufacturing production rose in January by 0.49 percent sequentially – its biggest monthly gain since last July's one percent increase. But negative revisions for each month going back to October kept domestic industry on the verge of a technical recession, with cumulative real output down for a five-month stretch.

>The automotive sector, which has led manufacturing's bounce-back following a deep post-financial crisis dive, also generated its best monthly real production increase (2.84 percent) since July (10.60 percent) but remained in technical recession. Its real output down on net 4.79 percent since that month.

>The automotive slump also helped drag the larger durable goods super sector into a technical recession in January. Its real output advanced by 0.52 percent from December to January – also its strongest monthly improvement since July (1.23 percent). But its inflation-adjusted output has fallen by 0.44 percent since then.

>The January Fed figures revised December's previously reported 0.05 percent real manufacturing production decrease down to a 0.18 percent decline. November's already downwardly revised 0.16 percent decline was downgraded further to 0.27 percent. And October's increased 0.37 percent monthly after-inflation production gain is now pegged at 0.32 percent.

>In addition, these revisions pushed 2015's full-year real manufacturing growth figure down from 0.74 percent – already the worst since recessionary 2009's 2.94 percent plunge – to 0.49 percent.

>Since the last recession began, in December, 2007, real manufacturing output is down 1.27 percent.

>In January, inflation-adjusted manufacturing production rose by 1.23 percent year-on-year – much worse than 2014-2015's 4.73 percent, but better than 2013-14's 0.18 percent – which was suppressed by harsh winter weather. Moreover, the December number was manufacturing's lowest year-on-year growth level since January, 2014's winter-affected 0.19 percent.

>Durable goods' strong January monthly performance was not enough to lift the super sector out of technical recession, largely because all revisions back to October were downgrades. December's initially reported 0.11 percent sequential monthly gain is now judged to be a 0.24 percent loss. November's already downwardly revised 0.49 percent decrease is now pegged at 0.69 percent, and October's already lowered 0.53 percent monthly growth was cut again to 0.49 percent.

>Durable goods annual output gains are also depressed. The full-year 2015 0.49 percent constant dollar production increase has now been revised to a fractional decline – its worst such performance since its 5.26 percent drop in recessionary 2009. Between 2014 and 2015, real durable goods output increased by 5.36 percent.

>In January, year-on-year real durable goods production rose by 0.81 percent – much lower than 2014-2015's 5.97 percent, but better than 2013-2014's (also winter-affected) 0.76 percent.

>Inflation-adjusted durable goods production is now only 3.02 percent percent higher than when the last recession began in December, 2007 – more than eight years ago.

>Non-durable goods production rose on month by 0.44 percent in January after inflation – also its best such performance since last July (0.72 percent).

>Revisions in the non-durables super-sector were mixed. December's 0.23 percent monthly real output dip was revised up to 0.10 percent. November's already downwardly revised 0.24 percent decline remained unchanged, but October's increase was downgraded again, from 0.17 percent to 0.13 percent.

>On a year-on-year basis, 2015's full-year inflation-adjusted non-durable goods output was revised slightly higher – from 1.06 percent to 1.08 percent. That figure was much lower than the previous year's 2.84 percent, but much higher than 2013-2014's 0.52 percent.

>In January, real non-durable goods production advanced by 1.73 percent on year.

>Although the non-durable goods super sector has recently begun to out-grow durable goods – reversing a pattern that had held during the current recovery – its inflation-adjusted production is still down by 6.60 percent since its pre-recession peak in July, 2007.

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