US Industrial Production Increased 3.0 Percent in Jul and 5.7 Percent
in Jun But Still 8.4 Percent Below The Level Before the Global Recession,
with Output in the US Reaching a High in Feb 2020 (https://www.nber.org/cycles.html), in the Lockdown
of Economic Activity in the COVID-19 Event, United States Manufacturing
Underperforming in the
Lost Economic Cycle of the Global Recession with Economic Growth
Underperforming Below Trend Worldwide, Squeeze of Economic Activity by Carry
Trades Induced by Zero Interest Rates, United States Economic Indicators Continuing
Recovery, Dollar Devaluation and Yuan Revaluation, Fluctuating Yields of
Sovereign Securities, Increase in Prices Worldwide, World
Cyclical Slow Growth, and Government Intervention in Globalization: Part I
Carlos M. Pelaez
© Carlos M. Pelaez, 2009,
2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
I United States Industrial Production
IIB Squeeze of Economic Activity by Carry Trades Induced
by Zero Interest Rates
III World Financial Turbulence
IV Global Inflation
V World Economic
Slowdown
VA United States
VB Japan
VC China
VD Euro Area
VE Germany
VF France
VG Italy
VH United Kingdom
VI Valuation of Risk
Financial Assets
VII Economic Indicators
VIII Interest Rates
IX Conclusion
References
Appendixes
Appendix I The Great Inflation
IIIB Appendix on Safe
Haven Currencies
IIIC Appendix on
Fiscal Compact
IIID Appendix on
European Central Bank Large Scale Lender of Last Resort
IIIG Appendix on Deficit
Financing of Growth and the Debt Crisis
Industrial production increased 3.0 percent in Jul 2020
and increased 5.7 percent in Jun 2020 after increasing 0.9 percent in May 2020,
with all data seasonally adjusted, as
shown in Table I-1. The Board of Governors of the Federal Reserve System
conducted the annual revision of industrial production released on Mar 27, 2019
(https://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm):
“The Federal
Reserve has revised its index of industrial production (IP) and the related
measures of capacity and capacity utilization.[1] On net, the revisions to the growth
rates for total IP for recent years were small and positive, with the estimates
for 2016 and 2017 a bit higher and the estimates for 2015 and 2018 slightly
lower.[2] Total IP is still reported to have
increased from the end of the recession in mid-2009 through late 2014 before
declining in 2015 and rebounding in mid-2016. Subsequently, the index advanced
around 7 1/2 percent over 2017 and 2018.
Capacity for
total industry expanded modestly in each year from 2015 to 2017 before
advancing 1 1/2 percent in 2018; it is expected to advance about 2 percent in
2019. Revisions for recent years were very small and showed slightly less
expansion in most years relative to earlier reports.
In the fourth
quarter of 2018, capacity utilization for total industry stood at 79.4 percent,
about 3/4 percentage point above its previous estimate and about 1/2 percentage
point below its long-run (1972–2018) average. The utilization rate in 2017 is
also higher than its previous estimate.”
The report of
the Board of Governors of the Federal Reserve System states (https://www.federalreserve.gov/releases/g17/current/default.htm):
“Total industrial production rose 3.0 percent in July
after increasing 5.7 percent in June; even so, the index in July was
8.4 percent below its pre-pandemic February level. Manufacturing output
continued to improve in July, rising 3.4 percent. Most major industries
posted increases, though they were much smaller in magnitude than the advances
recorded in June. The largest gain in July—28.3 percent—was registered by
motor vehicles and parts; factory production elsewhere advanced
1.6 percent. Mining production rose 0.8 percent after decreasing for
five consecutive months. The output of utilities increased 3.3 percent, as
unusually warm temperatures increased the demand for air conditioning. At
100.2 percent of its 2012 average, the level of total industrial
production was 8.2 percent lower in July than it was a year earlier.
Capacity utilization for the industrial sector increased 2.1 percentage
points in July to 70.6 percent, a rate that is 9.2 percentage points
below its long-run (1972–2019) average but 6.4 percentage points above its
low in April.” In the six months
ending in Jul 2020, United States national industrial production accumulated
change of minus 8.2 percent at the annual equivalent rate of minus 15.8
percent, which is lower than growth of minus 8.2 percent in the 12 months
ending in Jul 2020. Excluding growth of 0.1 percent in Feb 2019, growth in the
remaining five months from Feb 2019 to Jul 2020 accumulated to minus 8.3
percent or minus 18.8 percent annual equivalent. Industrial production
increased 5.7 percent in one of the past six months, 3.0 percent in one month,
0.9 percent in one month, 0.1 percent in one month, minus 12.8 percent in one
month and minus 4.3 percent in one month. Industrial production increased at
annual equivalent 45.6 percent in the most recent quarter from May 2020 to Jul
2020 and decreased at 51.3 percent annual equivalent in the prior quarter from Feb
2020 to Apr 2020. Business equipment accumulated change of minus 11.7 percent
in the six months from Feb 2020 to Jul 2020, at the annual equivalent rate of
minus 22.1 percent, which is lower than growth of minus 13.9 percent in the 12
months ending in Jul 2020. The Fed analyzes capacity utilization of total
industry in its report (https://www.federalreserve.gov/releases/g17/Current/default.htm): ” Capacity utilization for the industrial
sector increased 2.1 percentage points in July to 70.6 percent, a
rate that is 9.2 percentage points below its long-run (1972–2019) average
but 6.4 percentage points above its low in April.” United States industry apparently decelerated
to a lower growth rate followed by possible acceleration, weakening growth in
past months and deep contraction in the global recession, with output in the US
reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event.
Table I-1, US,
Industrial Production and Capacity Utilization, SA, ∆%
|
Jul 20 |
Jun 20 |
May 20 |
Apr 20 |
Mar 20 |
Feb 20 |
Jul 20/ Jul 19 |
|
|
Total |
3.0 |
5.7 |
0.9 |
-12.8 |
-4.3 |
0.1 |
-8.2 |
|
Market |
|
|
|
|
|
|
|
|
Final
Products |
4.5 |
8.6 |
4.4 |
-15.3 |
-5.8 |
0.8 |
-5.9 |
|
Consumer
Goods |
4.6 |
8.6 |
4.1 |
-12.8 |
-5.4 |
1.2 |
-2.2 |
|
Business
Equipment |
5.0 |
11.7 |
7.1 |
-23.3 |
-8.0 |
-0.4 |
-13.9 |
|
Non |
1.5 |
2.8 |
1.8 |
-11.9 |
-4.6 |
0.3 |
-9.3 |
|
Construction |
0.4 |
1.4 |
2.9 |
-12.0 |
-3.7 |
-0.3 |
-8.0 |
|
Materials |
2.2 |
4.0 |
-2.2 |
-11.0 |
-2.9 |
-0.6 |
-9.8 |
|
Industry
Groups |
|
|
|
|
|
|
|
|
Manufacturing
|
3.4 |
7.4 |
3.8 |
-16.0 |
-5.0 |
0.0 |
-7.7 |
|
Mining |
0.8 |
-0.3 |
-11.3 |
-7.0 |
-1.6 |
-1.6 |
-17.0 |
|
Utilities |
3.3 |
2.0 |
-0.5 |
1.9 |
-3.1 |
3.6 |
0.6 |
|
Capacity |
70.6 |
68.5 |
64.8 |
64.2 |
73.6 |
76.9 |
0.8 |
Sources: Board
of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/default.htm
Manufacturing increased 3.4 percent in Jul 2020 and increased 7.4
percent in Jun 2020 after increasing 3.8 percent in May2020, seasonally
adjusted, decreasing 8.0 percent not seasonally adjusted in the 12 months
ending in Jul 2020, as shown in Table I-2. Manufacturing changed cumulatively
minus 8.0 percent in the six months ending in Jul 2020 or at the annual
equivalent rate of minus 15.4 percent. Excluding the change of 0.0 percent in Feb
2020, manufacturing decreased 8.0 percent from Feb 2020 to Jul 2020 or at the
annual equivalent rate of minus 18.2 percent. Table I-2 provides a longer
perspective of manufacturing in the US. There has been evident deceleration of
manufacturing growth in the US from 2010 and the first three months of 2011
with recovery followed by renewed deterioration/improvement in more recent
months as shown by 12 months’ rates of growth. Growth rates appeared to be
increasing again closer to 5 percent in Apr-Jun 2012 but deteriorated. The
rates of decline of manufacturing in 2009 are quite high with a drop of 18.6
percent in the 12 months ending in Apr 2009. Manufacturing recovered from this
decline and led the recovery from the recession. Rates of growth appeared to be
returning to the levels at 3 percent or higher in the annual rates before the
recession, but the pace of manufacturing fell steadily with some strength at
the margin. There is renewed deterioration and improvement. The Board of Governors of the Federal Reserve System
conducted the annual revision of industrial production released on Mar 27, 2019
(https://www.federalreserve.gov/releases/g17/revisions/Current/DefaultRev.htm):
“The Federal
Reserve has revised its index of industrial production (IP) and the related
measures of capacity and capacity utilization.[1] On net,
the revisions to the growth rates for total IP for recent years were small and
positive, with the estimates for 2016 and 2017 a bit higher and the estimates
for 2015 and 2018 slightly lower.[2] Total IP
is still reported to have increased from the end of the recession in mid-2009
through late 2014 before declining in 2015 and rebounding in mid-2016.
Subsequently, the index advanced around 7 1/2 percent over 2017 and 2018.
Capacity for
total industry expanded modestly in each year from 2015 to 2017 before
advancing 1 1/2 percent in 2018; it is expected to advance about 2 percent in
2019. Revisions for recent years were very small and showed slightly less
expansion in most years relative to earlier reports.
In the fourth quarter of 2018, capacity utilization for total
industry stood at 79.4 percent, about 3/4 percentage point above its previous
estimate and about 1/2 percentage point below its long-run (1972–2018) average.
The utilization rate in 2017 is also higher than its previous estimate.”
Manufacturing decreased
22.3 percent from the peak in Jun 2007 to the trough in Apr 2009 and increased
18.3 percent from the trough in Apr 2009 to Dec 2019. Manufacturing increased
8.6 percent from the trough in Apr 2009 to Jul 2020. Manufacturing in Jul
2020 is lower by 15.6 percent relative to the peak in Jun 2007. The US maintained growth at 3.0 percent on average over entire
cycles with expansions at higher rates compensating for contractions. US economic
growth has been at only 1.2 percent on average in the cyclical expansion in the
44 quarters from IIIQ2009 to IIQ2020 and in the global recession with output in
the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. Boskin (2010Sep) measures
that the US economy grew at 6.2 percent in the first four quarters and 4.5
percent in the first 12 quarters after the trough in the second quarter of
1975; and at 7.7 percent in the first four quarters and 5.8 percent in the
first 12 quarters after the trough in the first quarter of 1983 (Professor
Michael J. Boskin, Summer of Discontent, Wall
Street Journal, Sep 2, 2010 http://professional.wsj.com/article/SB10001424052748703882304575465462926649950.html). There are
new calculations using the revision of US GDP and personal income data since
1929 by the Bureau of Economic Analysis (BEA) (http://bea.gov/iTable/index_nipa.cfm) and the
first estimate of GDP for IIQ2020 (https://www.bea.gov/sites/default/files/2020-07/gdp2q20_adv.pdf). The
average of 7.7 percent in the first four quarters of major cyclical expansions
is in contrast with the rate of growth in the first four quarters of the
expansion from IIIQ2009 to IIQ2010 of only 2.8 percent obtained by dividing GDP
of $15,557.3 billion in IIQ2010 by GDP of $15,134.1 billion in IIQ2009 {[($15,557.3/$15,134.1)
-1]100 = 2.8%], or accumulating the quarter on quarter growth rates (https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.html and earlier https://cmpassocregulationblog.blogspot.com/2020/06/mediocre-cyclical-united-states.html). The expansion
from IQ1983 to IQ1986 was at the average annual
growth rate of 5.7 percent, 5.3 percent from IQ1983 to IIIQ1986, 5.1
percent from IQ1983 to IVQ1986, 5.0 percent from IQ1983 to IQ1987, 5.0 percent
from IQ1983 to IIQ1987, 4.9 percent from IQ1983 to IIIQ1987, 5.0 percent from
IQ1983 to IVQ1987, 4.9 percent from IQ1983 to IIQ1988, 4.8 percent from IQ1983
to IIIQ1988, 4.8 percent from IQ1983 to IVQ1988, 4.8 percent from IQ1983 to
IQ1989, 4.7 percent from IQ1983 to IIQ1989, 4.6 percent from IQ1983 to IIIQ1989,
4.5 percent from IQ1983 to IVQ1989. 4.5 percent from IQ1983 to IQ1990, 4.4
percent from IQ1983 to IIQ1990, 4.3 percent from IQ1983 to IIIQ1990, 4.0
percent from IQ1983 to IVQ1990, 3.8 percent from IQ1983 to IQ1991, 3.8 percent
from IQ1983 to IIQ1991, 3.8 percent from IQ1983 to IIIQ1991, 3.7 percent from
IQ1983 to IVQ1991, 3.7 percent from IQ1983 to IQ1992, 3.7 percent from IQ1983
to IIQ1992, 3.7 percent from IQ1983 to IIIQ2019, 3.8 percent from IQ1983 to
IVQ1992, 3.7 percent from IQ1983 to IQ1993, 3.6 percent from IQ1983 to IIQ1993,
3.6 percent from IQ1983 to IIIQ1993, 3.7 percent from IQ1983 to IVQ1993 and at
7.9 percent from IQ1983 to IVQ1983 (https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.html and earlier https://cmpassocregulationblog.blogspot.com/2020/06/mediocre-cyclical-united-states.html). The
National Bureau of Economic Research (NBER) dates a contraction of the US from
IQ1990 (Jul) to IQ1991 (Mar) (https://www.nber.org/cycles.html). The
expansion lasted until another contraction beginning in IQ2001 (Mar). US GDP
contracted 1.3 percent from the pre-recession peak of $8983.9 billion of
chained 2009 dollars in IIIQ1990 to the trough of $8865.6 billion in IQ1991 (https://apps.bea.gov/iTable/index_nipa.cfm). The US
maintained growth at 3.0 percent on average over entire cycles with expansions
at higher rates compensating for contractions. Growth at trend in the entire
cycle from IVQ2007 to IIQ2020 and in the global recession with output in the US
reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event would have accumulated to
44.7 percent. GDP in IIQ2020 would be $22,807.6 billion (in constant dollars of
2012) if the US had grown at trend, which is higher by $5601.8 billion than
actual $17,205.8 billion. There are more than five trillion dollars of GDP less
than at trend, explaining the 38.5 million unemployed or underemployed
equivalent to actual unemployment/underemployment of 22.3 percent of the
effective labor force with the largest part originating in the global recession
with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event (https://cmpassocregulationblog.blogspot.com/2020/08/thirty-eight-million-unemployed-or.html and earlier https://cmpassocregulationblog.blogspot.com/2020/07/increase-of-total-nonfarm-payroll-jobs.html). Unemployment is decreasing while employment is increasing in
initial adjustment of the lockdown of economic activity in the global recession
resulting from the COVID-19 event (https://www.bls.gov/cps/employment-situation-covid19-faq-june-2020.pdf). US GDP in IQ2020 is 24.6 percent lower than at trend. US GDP
grew from $15,762.0 billion in IVQ2007
in constant dollars to $17,205.8 billion in IQ2020 or 9.2 percent at the
average annual equivalent rate of 0.7 percent. Professor John H. Cochrane
(2014Jul2) estimates US GDP at more than 10 percent below trend. Cochrane
(2016May02) measures GDP growth in the US at average 3.5 percent per year from
1950 to 2000 and only at 1.76 percent per year from 2000 to 2015 with only at
2.0 percent annual equivalent in the current expansion. Cochrane (2016May02)
proposes drastic changes in regulation and legal obstacles to private economic
activity. The US missed the opportunity to grow at higher rates during the
expansion and it is difficult to catch up because growth rates in the final
periods of expansions tend to decline. The US missed the opportunity for
recovery of output and employment always afforded in the first four quarters of
expansion from recessions. Zero interest rates and quantitative easing were not
required or present in successful cyclical expansions and in secular economic
growth at 3.0 percent per year and 2.0 percent per capita as measured by Lucas
(2011May). There is cyclical uncommonly
slow growth in the US instead of allegations of secular stagnation. There is similar behavior in manufacturing.
There is classic research on analyzing deviations of output from trend (see for
example Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The
long-term trend is growth of manufacturing at average 2.9 percent per year from
Jul 1919 to Jul 2020. Growth at 2.9 percent per year would raise the NSA index
of manufacturing output (SIC, Standard Industrial Classification) from 108.2987
in Dec 2007 to 155.1850 in Jul 2020. The actual index NSA in Jul 2020 is 94.7916
which is 38.9 percent below trend. The underperformance of manufacturing in Jul
2020 originates partly in the earlier global recession augmented by the current
global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19. Manufacturing grew at the
average annual rate of 3.3 percent between Dec 1986 and Dec 2006. Growth at 3.3
percent per year would raise the NSA index of manufacturing output (SIC,
Standard Industrial Classification) from 108.2987 in Dec 2007 to 162.9490 in Jul
2020. The actual index NSA in Jul 2020 is 94.7916, which is 41.8 percent below
trend. Manufacturing output grew at average 1.6 percent between Dec 1986 and Jul
2020. Using trend growth of 1.6 percent per year, the index would increase to
132.2418 in Jul 2020. The output of manufacturing at 94.7916 in Jul 2020 is 28.3
percent below trend under this alternative calculation. Using the NAICS (North American Industry Classification
System), manufacturing output fell from the high of 110.5147 in Jun 2007 to the
low of 86.3800 in Apr 2009 or 21.8 percent. The NAICS manufacturing index
increased from 86.3800 in Apr 2009 to 95.7434 in Jul 2020 or 10.8 percent. The
NAICS manufacturing index increased at the annual equivalent rate of 3.5
percent from Dec 1986 to Dec 2006. Growth at 3.5 percent would increase the
NAICS manufacturing output index from 106.6777 in Dec 2007 to 164.4646 in Jul
2020. The NAICS index at 95.7434 in Jul 2020 is 41.8 below trend. The NAICS
manufacturing output index grew at 1.7 percent annual equivalent from Dec 1999
to Dec 2006. Growth at 1.7 percent would raise the NAICS manufacturing output
index from 106.6777 in Dec 2007 to 131.8850 in Jul 2020. The NAICS index at 95.7434
in Jul 2020 is 27.4 percent below trend under this alternative calculation.
Table I-2, US,
Monthly and 12-Month Rates of Growth of Manufacturing ∆%
|
|
Month SA ∆% |
12-Month NSA
∆% |
|
Jul 2020 |
3.4 |
-8.0 |
|
Jun |
7.4 |
-11.1 |
|
May |
3.8 |
-16.6 |
|
Apr |
-16.0 |
-20.5 |
|
Mar |
-5.0 |
-5.3 |
|
Feb |
0.0 |
-0.2 |
|
Jan |
-0.1 |
-0.8 |
|
Dec 2019 |
0.2 |
-1.1 |
|
Nov |
0.9 |
-0.9 |
|
Oct |
-0.6 |
-1.7 |
|
Sep |
-0.6 |
-1.2 |
|
Aug |
0.6 |
-0.5 |
|
Jul |
-0.4 |
-0.7 |
|
Jun |
0.6 |
0.1 |
|
May |
0.1 |
0.2 |
|
Apr |
-0.9 |
-0.8 |
|
Mar |
-0.1 |
0.8 |
|
Feb |
-0.5 |
0.9 |
|
Jan |
-0.6 |
2.3 |
|
Dec 2018 |
0.6 |
2.2 |
|
Nov |
0.2 |
1.7 |
|
Oct |
-0.1 |
1.9 |
|
Sep |
0.0 |
3.5 |
|
Aug |
0.4 |
3.3 |
|
Jul |
0.4 |
2.5 |
|
Jun |
0.7 |
1.8 |
|
May |
-0.8 |
1.3 |
|
Apr |
0.4 |
3.3 |
|
Mar |
0.0 |
2.5 |
|
Feb |
1.1 |
2.4 |
|
Jan |
-0.4 |
1.3 |
|
Dec 2017 |
-0.1 |
2.3 |
|
Nov |
0.3 |
2.7 |
|
Oct |
1.3 |
2.5 |
|
Sep |
-0.2 |
1.4 |
|
Aug |
-0.3 |
2.1 |
|
Jul |
-0.2 |
2.3 |
|
Jun |
0.1 |
2.4 |
|
May |
-0.2 |
2.7 |
|
Apr |
1.1 |
1.3 |
|
Mar |
-0.3 |
1.8 |
|
Feb |
-0.1 |
1.4 |
|
Jan |
0.6 |
0.7 |
|
Dec 2016 |
0.3 |
0.9 |
|
Nov |
0.1 |
0.1 |
|
Oct |
0.3 |
-0.1 |
|
Sep |
0.4 |
-0.1 |
|
Aug |
-0.4 |
-1.5 |
|
Jul |
0.3 |
-1.5 |
|
Jun |
0.3 |
-0.9 |
|
May |
0.0 |
-1.7 |
|
Apr |
-0.4 |
-1.0 |
|
Mar |
-0.2 |
-2.1 |
|
Feb |
-0.6 |
-0.8 |
|
Jan |
0.7 |
-0.9 |
|
Dec 2015 |
-0.3 |
-2.0 |
|
Nov |
-0.3 |
-1.8 |
|
Oct |
0.0 |
-0.8 |
|
Sep |
-0.4 |
-1.7 |
|
Aug |
-0.3 |
-0.6 |
|
Jul |
0.7 |
-0.4 |
|
Jun |
-0.4 |
-1.1 |
|
May |
0.0 |
-0.2 |
|
Apr |
-0.1 |
-0.1 |
|
Mar |
0.3 |
0.0 |
|
Feb |
-0.7 |
0.5 |
|
Jan |
-0.4 |
2.0 |
|
Dec 2014 |
-0.3 |
1.6 |
|
Nov |
0.8 |
1.8 |
|
Oct |
-0.1 |
1.0 |
|
Sep |
0.0 |
1.1 |
|
Aug |
-0.5 |
1.3 |
|
Jul |
0.4 |
2.0 |
|
Jun |
0.4 |
1.4 |
|
May |
0.3 |
1.3 |
|
Apr |
-0.2 |
0.9 |
|
Mar |
0.8 |
1.5 |
|
Feb |
1.0 |
0.2 |
|
Jan |
-1.1 |
-0.6 |
|
Dec 2013 |
0.0 |
0.1 |
|
Nov |
0.0 |
1.2 |
|
Oct |
0.1 |
1.9 |
|
Sep |
0.1 |
1.2 |
|
Aug |
0.9 |
1.3 |
|
Jul |
-0.9 |
0.3 |
|
Jun |
0.2 |
0.7 |
|
May |
0.3 |
0.9 |
|
Apr |
-0.4 |
1.0 |
|
Mar |
-0.1 |
0.6 |
|
Feb |
0.5 |
0.7 |
|
Jan |
-0.3 |
0.8 |
|
Dec 2012 |
0.8 |
1.6 |
|
Nov |
0.7 |
1.7 |
|
Oct |
-0.4 |
0.7 |
|
Sep |
-0.1 |
1.6 |
|
Aug |
-0.2 |
2.1 |
|
Jul |
-0.1 |
2.4 |
|
Jun |
0.2 |
3.4 |
|
May |
-0.4 |
3.4 |
|
Apr |
0.5 |
3.8 |
|
Mar |
-0.5 |
2.8 |
|
Feb |
0.3 |
4.2 |
|
Jan |
0.8 |
3.5 |
|
Dec 2011 |
0.7 |
3.1 |
|
Nov |
-0.3 |
2.7 |
|
Oct |
0.5 |
2.8 |
|
Sep |
0.3 |
2.6 |
|
Aug |
0.4 |
2.1 |
|
Jul |
0.6 |
2.3 |
|
Jun |
0.1 |
1.7 |
|
May |
0.1 |
1.5 |
|
Apr |
-0.6 |
2.7 |
|
Mar |
0.6 |
4.2 |
|
Feb |
0.1 |
4.8 |
|
Jan |
0.2 |
4.8 |
|
Dec 2010 |
0.5 |
5.5 |
|
Nov |
0.0 |
4.6 |
|
Oct |
0.1 |
5.8 |
|
Sep |
0.0 |
6.1 |
|
Aug |
0.1 |
6.8 |
|
Jul |
0.6 |
7.5 |
|
Jun |
-0.1 |
9.2 |
|
May |
1.4 |
8.9 |
|
Apr |
0.8 |
7.2 |
|
Mar |
1.2 |
5.1 |
|
Feb |
0.0 |
1.7 |
|
Jan |
1.1 |
1.6 |
|
Dec 2009 |
-0.2 |
-2.9 |
|
Nov |
1.0 |
-5.8 |
|
Oct |
0.2 |
-8.9 |
|
Sep |
0.9 |
-10.4 |
|
Aug |
1.1 |
-13.5 |
|
Jul |
1.5 |
-15.3 |
|
Jun |
-0.3 |
-17.9 |
|
May |
-1.1 |
-17.9 |
|
Apr |
-0.7 |
-18.6 |
|
Mar |
-1.9 |
-17.8 |
|
Feb |
-0.1 |
-16.7 |
|
Jan |
-3.0 |
-17.0 |
|
Dec 2008 |
-3.5 |
-14.5 |
|
Nov |
-2.4 |
-11.8 |
|
Oct |
-0.6 |
-9.2 |
|
Sep |
-3.5 |
-8.8 |
|
Aug |
-1.2 |
-5.2 |
|
Jul |
-1.2 |
-3.7 |
|
Jun |
-0.7 |
-3.2 |
|
May |
-0.5 |
-2.3 |
|
Apr |
-1.1 |
-1.0 |
|
Mar |
-0.3 |
-0.5 |
|
Feb |
-0.6 |
1.1 |
|
Jan |
-0.4 |
2.5 |
|
Dec 2007 |
0.1 |
2.1 |
|
Nov |
0.6 |
3.5 |
|
Oct |
-0.3 |
2.9 |
|
Sep |
0.5 |
2.9 |
|
Aug |
-0.3 |
2.7 |
|
Jul |
0.1 |
3.6 |
|
Jun |
0.3 |
3.1 |
|
May |
-0.1 |
3.2 |
|
Apr |
0.7 |
3.7 |
|
Mar |
0.9 |
2.6 |
|
Feb |
0.4 |
1.6 |
|
Jan |
-0.5 |
1.2 |
|
Dec 2006 |
|
2.7 |
|
Dec 2005 |
|
3.6 |
|
Dec 2004 |
|
4.1 |
|
Dec 2003 |
|
2.3 |
|
Dec 2002 |
|
2.4 |
|
Dec 2001 |
|
-5.3 |
|
Dec 2000 |
|
0.8 |
|
Dec 1999 |
|
5.2 |
|
Average ∆% Dec 1986-Dec 2019 |
|
1.9 |
|
Average ∆% Dec 1986-Dec 2018 |
|
2.0 |
|
Average ∆% Dec 1986-Dec 2017 |
|
2.0 |
|
Average ∆% Dec 1986-Dec 2016 |
|
2.0 |
|
Average ∆% Dec 1986-Dec 2015 |
|
2.0 |
|
Average ∆% Dec 1986-Dec 2014 |
|
2.2 |
|
Average ∆% Dec 1986-Dec 2013 |
|
2.2 |
|
Average ∆% Dec 1986-Dec 1999 |
|
4.3 |
|
Average ∆% Dec 1999-Dec 2006 |
|
1.5 |
|
Average ∆% Dec 1986-Dec 2006 |
|
3.3 |
|
Average ∆% Dec 1999-Dec 2017 |
|
0.4 |
|
Average ∆% Dec 1999-Dec 2018 |
|
0.5 |
|
Average ∆% Dec 1999-Dec 2019 |
|
0.4 |
|
∆% Peak 112.3113 in 06/2007 to 103.3123 in 12/2019 |
|
-8.0 |
|
∆% Peak 112.3113 in 06/2007 to Trough 87.3028 in 4/2009 |
|
-22.3 |
|
∆% Trough 87.3028 in 04/2009 to 103.3123 in 12/2019 |
|
18.3 |
|
∆% Trough 87.3028 in 04/2009 to 94.7916 in 7/2020 |
|
8.6 |
|
∆% Peak 112.3113 in 06/2007 to 94.7916 in 7/2020 |
|
-15.6 |
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/default.htm
https://www.federalreserve.gov/releases/g17/Revisions/Current/DefaultRev.htm
Chart
I-1 of the Board of Governors of the Federal Reserve System provides industrial
production, manufacturing and capacity since the 1970s. There was acceleration
of growth of industrial production, manufacturing and capacity in the 1990s
because of rapid growth of productivity in the US (Cobet and Wilson (2002); see
Pelaez and Pelaez, The Global Recession Risk (2007), 135-44). The slopes
of the curves flatten in the 2000s. Production and capacity have not recovered
sufficiently above levels before the global recession, remaining like GDP below
historical trend. The final data point for May 2019. There is sharp contraction
of output in the global recession, with output in the US reaching a
high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event. There is cyclical uncommonly slow growth in the
US instead of allegations of secular
stagnation. There is similar behavior in manufacturing. There is classic
research on analyzing deviations of output from trend (see for example
Schumpeter 1939, Hicks 1950, Lucas 1975, Sargent and Sims 1977). The long-term
trend is growth of manufacturing at average 2.9 percent per year from Jul 1919
to Jul 2020. Growth at 2.9 percent per year would raise the NSA index of
manufacturing output (SIC, Standard Industrial Classification) from 108.2987 in
Dec 2007 to 155.1850 in Jul 2020. The actual index NSA in Jul 2020 is 94.7916
which is 38.9 percent below trend. The underperformance of manufacturing in Jul
2020 originates partly in the earlier global recession augmented by the current
global recession with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19. Manufacturing grew at the
average annual rate of 3.3 percent between Dec 1986 and Dec 2006. Growth at 3.3
percent per year would raise the NSA index of manufacturing output (SIC,
Standard Industrial Classification) from 108.2987 in Dec 2007 to 162.9490 in Jul
2020. The actual index NSA in Jul 2020 is 94.7916, which is 41.8 percent below
trend. Manufacturing output grew at average 1.6 percent between Dec 1986 and Jul
2020. Using trend growth of 1.6 percent per year, the index would increase to
132.2418 in Jul 2020. The output of manufacturing at 94.7916 in Jul 2020 is 28.3
percent below trend under this alternative calculation. Using the NAICS (North American Industry Classification
System), manufacturing output fell from the high of 110.5147 in Jun 2007 to the
low of 86.3800 in Apr 2009 or 21.8 percent. The NAICS manufacturing index
increased from 86.3800 in Apr 2009 to 95.7434 in Jul 2020 or 10.8 percent. The
NAICS manufacturing index increased at the annual equivalent rate of 3.5
percent from Dec 1986 to Dec 2006. Growth at 3.5 percent would increase the
NAICS manufacturing output index from 106.6777 in Dec 2007 to 164.4646 in Jul
2020. The NAICS index at 95.7434 in Jul 2020 is 41.8 below trend. The NAICS
manufacturing output index grew at 1.7 percent annual equivalent from Dec 1999
to Dec 2006. Growth at 1.7 percent would raise the NAICS manufacturing output
index from 106.6777 in Dec 2007 to 131.8850 in Jul 2020. The NAICS index at 95.7434
in Jul 2020 is 27.4 percent below trend under this alternative calculation.
Chart I-1, US, Industrial Production, Capacity and
Utilization
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/ipg1.gif
Additional detail on industrial production and capacity
utilization is in Chart I-2 of the Board of Governors of the Federal Reserve
System. Production of consumer durable goods fell sharply during the global
recession by more than 30 percent and is oscillating above the level before the
contraction. Output of nondurable consumer goods fell around 10 percent and is
some 5 percent below the level before the contraction. Output of business
equipment fell sharply during the contraction of 2001 but began rapid growth
again after 2004. An important characteristic is rapid growth of output of
business equipment in the cyclical expansion after sharp contraction in the
global recession, stalling in the final segment followed by recovery. Output of
defense and space only suffered reduction in the rate of growth during the
global recession and surged ahead of the level before the contraction,
declining in the final segment. Output of construction supplies collapsed
during the global recession and is well below the level before the contraction.
Output of energy materials was stagnant before the contraction but recovered
sharply above the level before the contraction with alternating recent
decline/improvement. There are deep contractions in Mar-Apr 2020 in the global
recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event with recovery beginning in
May-Jul 2020.
Chart I-2, US, Industrial Production, Capacity and
Utilization
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/ipg3.gif
The modern industrial revolution of Jensen (1993) is captured
in Chart I-3 of the Board of Governors of the Federal Reserve System (for the
literature on M&A and corporate control see Pelaez and Pelaez, Regulation
of Banks and Finance (2009a), 143-56, Globalization and the State, Vol.
I (2008a), 49-59, Government Intervention in Globalization (2008c),
46-49). The slope of the curve of total industrial production accelerates in
the 1990s to a much higher rate of growth than the curve excluding
high-technology industries. Growth rates decelerate into the 2000s and output
and capacity utilization have not recovered fully from the strong impact of the
global recession. Output of energy materials was stagnant before the
contraction but recovered sharply above the level before the contraction with
alternating recent decline/improvement followed by stability. Growth in the
current cyclical expansion has been more subdued than in the prior comparably
deep contractions in the 1970s and 1980s. Chart I-2 shows that the past
recessions after World War II are the relevant ones for comparison with the
recession after 2007 instead of common comparisons with the Great Depression (https://cmpassocregulationblog.blogspot.com/2020/08/contraction-of-united-states-gdp-at-32_57.html and earlier https://cmpassocregulationblog.blogspot.com/2020/06/mediocre-cyclical-united-states.html). The lower
part of Chart I-3 shows recent strong growth of energy compared with
non-energy. There are deep contractions in Mar-Apr 2020 in the global
recession, with output in the US reaching a high in Feb 2020 (https://www.nber.org/cycles.html), in the
lockdown of economic activity in the COVID-19 event with recovery beginning in
May-Jul 2020.
Chart I-3, US, Industrial Production and Capacity
Utilization, Selected Industries
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/ipg2.gif
© Carlos M. Pelaez, 2009,
2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
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