In the industrial production report this morning February manufacturing output was reported to drop 0.8%. On the surface this looks bearish.
But hours worked in manufacturing also fell 2.0% in February.
Consequently, manufacturing productivity rose 1.2% in February. The smoothed three month growth rate of estimated productivity is 0.1% and the year over year change is 0.4%.
A big jump in productivity is a major positive for a rebound in manufacturing profits and output.
Moreover, the 0.8% drop in manufacturing output while real retail sales obviously fell much less in February implies that manufacturing inventories were also sharply reduced in February.
Technical note — this measure of productivity is actually manufacturing output
divided by hours worked by production workers. It is not exactly productivity
as measured by the BLS, but it is close enough.