As the Federal Reserve reported that overall industrial production rose a solid 0.7 percent in February, rebounding from a 0.3 percent drop in January, National Association of Manufacturers (NAM) chief economist David Huether pointed out that manufacturing production slowed considerably.
“Energy sector reconstruction along the Gulf Coast continued apace,” Huether noted, “and natural gas production there made a desperately needed move toward recovery last month. That’s why energy sector production surged 12.9 percent.
“But if we exclude energy and mining production, and focus strictly on manufacturing production,” the three of which comprise industrial production data, Huether continued, “we’re left with just an incremental 0.1 percent increase for February.
“Following four months of very strong production growth, manufacturing took a bit of breather with gains in computers, furniture and aerospace offsetting downturns in most other sectors,” he explained.
“While overall manufacturing production is up a solid 4.4 percent over the past 12 months, a clear dichotomy has emerged in U.S. industry. Manufacturers of big-ticket items, such as computers and electronics, aircraft and machinery have benefited from solid gains in exports and business investment over the past several years and are producing at record levels.
“At the same time, manufacturers in other sectors such as chemicals, textiles and apparel have been overwhelmed by either high natural gas prices or increased import competition from low-cost foreign competition.
“There aren’t any simple solutions to these problems, but it’s clear that policymakers should move to bring the price of natural gas down to a more internationally competitive level by expanding deepwater exploration along the continental shelf. Our government also has to be more persuasive in convincing China to further revalue its currency,” Huether concluded.