New data released August 15th by the Federal Reserve finds U.S. industrial production was virtually unchanged in July, with a decline in manufacturing and mining output offset by an increase in utilities.
The Federal Reserve’s latest release on U.S. industrial production and capacity showed manufacturing production declined 0.4%, after increasing the same amount in June. Factory output has overall declined 1.5% since December of 2018.
The Fed recorded a steep decline in mining output, down 1.8%, though noted this was largely due to oil extraction disruptions in the Gulf of Mexico following Hurricane Barry.
Capacity utilization was flat at a 0.3% decline, while utilities usage rose sharply, up 3.1% over the month.
Loss Led by Multiple Industries
Manufacturing production’s 0.5% decline was led by multiple industries, including plastics and rubber products; wood products; textiles; nonmetallic mineral products; and machinery.
Motor vehicle parts production, which led last month’s manufacturing output increase, flatlined at 0.2%, while transportation equipment, including aerospace and miscellaneous transportation equipment, rose 1.4%.
Year-over-year, motor vehicle production has risen 3.7%, according to the Fed.
Related: A Closer Look at Growth in the U.S. Motor Vehicle Parts Industry
12-Month Look
On a year-over-year basis, the Fed reports manufacturing output dipped 0.5%, measured from July 2018 to July 2019. Over the same time frame, mining has increased 5.5% and utilities 2.5%.
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Looking at capacity utilization, which measures the extent to which industrial firms make use of their productive capacity, manufacturing utilization grew 1.2%, while mining jumped 6.9%. Utilization inched down 0.2% in June, following a 0.2% increase in May.
Industrial companies are now utilizing at a rate of 77.5%. This is 2.3% below its long-run average (1972-2018), the Fed noted.
Where is U.S. Manufacturing Headed?
As we head toward the final quarter of 2019, things are looking much different than they did one year ago.
The U.S. manufacturing sector has decidedly cooled, with the Institute for Supply Management’s barometer of industrial activity edging down once again in July to 51.2%, and although this still means manufacturing in the nation is still technically expanding (any reading over 50 indicates expansion), the index is falling far short of the 61.3% reading the ISM recorded a year ago.
Similarly, the manufacturing sector continues to add jobs, but at a slower rate than in 2018.
Manufacturers added 16,000 jobs in July, following June’s addition of 17,000 jobs. For several months of 2019, there was little to no increase in manufacturing employment, compared to the sector’s stellar job growth in 2018, in which manufacturers added 284,000 jobs.
Looking at the broader economy, employers added 164,000 jobs, continuing an upward trend, while the labor force rose to 63%.
A number of factors continue to impact the nation’s industrial sector. Comments from manufacturers responding to the ISM’s latest report on business reflect continued concerns about tariffs, supply disruptions, a tight labor market, and a slowdown in the transportation equipment industry.
But many manufacturers also reported strong business conditions and a general optimism for the future of manufacturing.
Related: U.S. Manufacturers Express Cautious Optimism Amid Easing Demand, Trade Woes
Although the sector is slowing, manufacturers continue to expand and break ground on new facilities. IndustryNet recently took a look at some of the more notable new plant announcements last month. You can read about that here.
The White House last month revamped the Buy American Act, unveiling a new plan to boost federal procurement of U.S.-manufactured products, which will hopefully serve to bolster manufacturing production, while investments in innovation and worker training programs continue to revitalize towns and cities across the U.S.
And as manufacturers readjust their supply chains in the face of continued tariff action, many are looking at producing more goods at home, providing a potential opportunity for more domestic suppliers.
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