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 III
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
Manufacturing
is underperforming in the lost cycle of the global recession. Manufacturing
(NAICS) in Jul 2020 is lower by 13.4 percent relative to the peak in Jun 2007,
as shown in Chart V-3A. Manufacturing (SIC) in Jul 2020 at 94.7916 is lower by
15.6 percent relative to the peak at 112.3113 in Jun 2007. 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 V-3A, United States Manufacturing NSA, Dec 2007 to Jul
2020
Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/default.htm
Chart V-3A, United States Manufacturing (NAICS) NSA, Jun 2007
to Jul 2020
Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/default.htm
Chart V-3B
provides the civilian noninstitutional population of the United States, or
those available for work. The civilian noninstitutional population increased
from 231.713 million in Jun 2007 to 260.373 million in Jul 2020 or 28.660
million.
Chart V-3B, United States, Civilian Noninstitutional
Population, Million, NSA, Jan 2007 to Jul 2020
Source: US Bureau of Labor Statistics
Chart V-3C, United States, Payroll Manufacturing Jobs, NSA,
Jan 2007 to Jul 2020, Thousands
Source: US Bureau of Labor Statistics
Chart V-3D provides the index of US manufacturing (NAICS) from Jan 1972
to Jul 2020. The index continued increasing during the decline of manufacturing
jobs after the early 1980s. There are likely effects of changes in the
composition of manufacturing with also changes in productivity and trade. There
is sharp decline 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 initial recovery
in May-Jul 2020.
Chart V-3D, United States Manufacturing (NAICS) NSA, Jan 1972
to Jul 2020
Source: Board of Governors of the Federal Reserve System
https://www.federalreserve.gov/releases/g17/Current/default.htm
Chart V-3E provides the US noninstitutional civilian
population, or those in condition of working, from Jan 1948, when first
available, to May 2020. The noninstitutional civilian population increased from
170.042 million in Jun 1981 to 260.373 million in Jul 2020, or 90.331 million.
Chart V-3E, United States, Civilian Noninstitutional
Population, Million, NSA, Jan 1948 to Jul 2020
Source: US Bureau of Labor Statistics
Chart V-3C, United States, Payroll Manufacturing Jobs, NSA,
Jan 1939 to Jul 2020, Thousands
Source: US Bureau of Labor Statistics
There is
global stress in manufacturing 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..
Table V-3B provides month and 12-month percentage changes of new orders in
manufacturing and output of manufacturing in Germany.
Table V-3B, Germany, Manufacturing Orders and Manufacturing
Output, ∆% Month and 12 Months
|
MFG New Orders Month ∆% |
MFG New Orders 12 Months ∆% |
MFG Output Month ∆% |
MFG Output 12 Month ∆% |
|
|
Jun 2020 |
27.9 |
-6.1 |
11.1 |
-8.0 |
|
May |
10.4 |
-33.4 |
10.0 |
-29.0 |
|
Apr |
-26.1 |
-36.9 |
-21.2 |
-30.1 |
|
Mar |
-15.0 |
-11.9 |
-11.0 |
-9.2 |
|
Feb |
-1.2 |
0.7 |
0.4 |
-3.7 |
|
Jan |
4.9 |
-1.9 |
2.3 |
-4.2 |
|
Dec 2019 |
-1.5 |
-7.1 |
-1.5 |
-4.5 |
|
Nov |
-1.3 |
-8.5 |
0.7 |
-6.9 |
|
Oct |
-0.4 |
-5.4 |
-1.2 |
-5.6 |
|
Sep |
1.2 |
-1.8 |
-0.8 |
-1.1 |
|
Aug |
-0.4 |
-9.0 |
0.2 |
-7.4 |
|
Jul |
-0.7 |
-1.8 |
-0.2 |
-0.6 |
|
Jun |
1.3 |
-11.0 |
-1.2 |
-14.4 |
|
May |
-1.6 |
-3.6 |
0.9 |
1.3 |
|
Apr |
-0.6 |
-5.2 |
-2.6 |
-3.9 |
|
Mar |
2.3 |
-6.2 |
0.7 |
-3.4 |
|
Feb |
-3.9 |
-7.2 |
-0.1 |
0.1 |
|
Jan |
-3.4 |
-3.6 |
-1.0 |
-3.1 |
|
Dec 2018 |
1.5 |
-8.2 |
1.1 |
-6.7 |
|
Dec 2017 |
2.5 |
3.9 |
-0.4 |
3.7 |
|
Dec 2016 |
4.4 |
11.2 |
-1.6 |
2.0 |
|
Dec 2015 |
-1.6 |
-0.5 |
0.8 |
1.1 |
Source: Federal Statistical Agency of Germany, https://www.destatis.de/EN/Home/_node.html
© Carlos M. Pelaez, 2009,
2010, 2011, 2012, 2013, 2014, 2015, 2016, 2017, 2018, 2019, 2020.
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