March industrial production only rose 0.1%. But this is a very misleading headline as
manufacturing output rose 0.9%. The difference was a 6.4% drop in output of utilities.
The decline in utilities largely reflects the March rise in temperatures and fall in heating days as the weather returned to normal after the severe snow storms of February.
Historically, recoveries have been proportional to the recessions — severe recessions have strong recoveries and mild recessions have weak recoveries. So far the recovery in industrial production this cycle looks about average. But given the depth and severity of the recessions an average rebound is disappointing.
The second aspect of the report reinforces last months signal that manufacturing productivity growth may be slowing very sharply. The monthly manufacturing productivity data is not reported, but I estimate it by dividing the output data reported by the Federal Reserve by the manufacturing hours worked data by the BLS. It is not exactly what is reported in the quarterly productivity data, but it is close enough to provide significant warnings of major trend changes and that is what the data is now showing.
Blessings on a change in the productivity trend. Factory hiring has risen, a tiny bit, after all this time.
Looking at the Empire and Philly prices received vs prices paid measures, though, I worry that factory mnanagers will change their minds about hiring. Have to close that cost gap somehow.
kHARRIS — over the past year the spread between the change in the nonfarm price deflator and unit labor costs has been 5.25 percentage points — the widest spread on record going back to 1948.
Nice graphs again. ON the first is it possible to place the Bush Sr and Clinton tax hikes on that curve? To see if it had an effect on the 1990 recovery – since we all know that tax hikes help get out of recessions.
Islam will change
I talked to a German company yesterday and they are experienceing 40 week lead times on solid state which is twice the norm and BS. This production I believe is imaginary and is based upon sales last Fall. I told the President of the company there is no way it takes 40 weeks to make product and lengthing of lead time will not resolve the issue.
The snake has a bulge passing through it and this will disappear shortly.
Thanks for the productivity data. LEI acceleration has sharply slowed over the last few months as well; +.3 and +.1
Didn’t know it was historically large, but I knew it was big. That gap is the profit driver for non-service, non-financial firms right now. I doubt that all the “excess” productivity gain will be surrendered during the expansion. Managers have learned new tricks to push up productivity. Might even be good for employment, in that it will make US production more cost-competitive. For now, though, the health of the economy really requires more private hours worked.