by Raymond J. Keating-
The latest industrial production report released on January 18 by the Federal Reserve showed that the industrial sector of our economy, for the most part, finished 2018 strong.
2018: Fast Growth
Overall industrial production – the output of the nation’s industrial sectors, i.e., manufacturing, mining and utilities – grew by 0.3 percent in December, following a gain of 0.4 percent in November. The growth in industrial production was positive for the last seven straight months.
For all of 2018, industrial production grew by 4.1 percent, which was the fastest rate of growth (excluding the partial bounce back in 2011 after step declines in 2009 and 2010) since 1999.
Meanwhile, manufacturing production in December was up by 1.1 percent, after growth of only 0.1 percent in November and a decline of 0.2 percent in October.
For all of 2018, manufacturing output grew by 2.4 percent, which was the strongest growth rate since 2012. Manufacturing production went from declining by 0.8 percent in 2016 to expanding by 1.2 percent in 2017 and by 2.4 percent in 2018.
Also in December, mining output grew by 1.5 percent, which followed 1.1 percent growth in November. Utilities output actually declined by 6.3 percent in December thanks to warmer-than-usual weather.
Taking a longer-run look, what’s amazing and troubling is that manufacturing production still remains below the high hit before the most recent recession. The growth that has been experienced since mid-2017 must be maintained and, ideally, accelerated. (See the following table.)
The Policy Impact
From a public policy standpoint, industrial production (most certainly including manufacturing) has benefitted from the tax and regulatory relief that has been implemented over the past two years.
Working in the opposite direction have been protectionist measures – both imposed and threatened tariffs, for example – which have raised costs and reduced opportunities for U.S. entrepreneurs, businesses and workers.
Moving forward, U.S. industry and its workers need a sound economic policy agenda of further advancing tax and regulatory relief, and returning to a global leadership role in favor of free trade and opening more global markets to U.S. small businesses.
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