Industrial Production Takes a Hit in July

By SBE Council at 16 August, 2024, 8:44 am

by Raymond J. Keating -

The industrial sector of our economy, including manufacturing, took a hit in July, according to the latest report from the Federal Reserve.

Industrial production - i.e., the actual physical output of the manufacturing, mining and utility sectors free from price changes - declined in July by 0.6 percent, and was revised down for the two previous months (from +0.6 percent to +0.3 percent in June, and from +0.9 percent in May to +0.8 percent).

Manufacturing production fell by 0.3 percent in July, with an original estimated gain of 0.4 percent in June revised down to 0.0 percent, and May's gain pared back from 1.0 percent to 0.8 percent. At the same time, however, the Fed reported, "Hurricane Beryl is estimated to have held down July manufacturing output 0.3 percent…"

In addition, mining output has been either down or flat in each of the last five months.

Compared to a year earlier, industrial production in July was down by 0.2 percent, manufacturing was up by a mere 0.1 percent, and mining was down by 1.5 percent.

For good measure, industrial production, including manufacturing output, has effectively been stagnant since the end of 2007. And keep in mind that most manufacturers in the U.S. are small firms, with 60.3 percent of employer firms in manufacturing having fewer than 10 employees, 75.2 percent fewer than 20 employees, and 93.4 percent fewer than 100 workers, based on the latest Census Bureau data (2021).

Policymakers need to establish the best possible policy climate in which entrepreneurship, investment and innovation can flourish. That will not be achieved via government subsidies, industrial policies and protectionism, but rather it would be accomplished by reducing government costs and obstacles via tax and regulatory relief, and free trade.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest books on the economy are The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist, The Weekly Economist II:52 More Quick Reads to Help You Think Like an Economistand The Weekly Economist III: Another 52 Quick Reads to Help You Think Like an Economist.

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