MAPI Analysis: Industrial Production Improvement is a ‘Welcome Relief’

The following is an analysis from Daniel J. Meckstroth, Ph.D., Chief Economist for the Manufacturers Alliance/MAPI, regarding the industrial production report for July 2009:

“The 0.5 percent increase in industrial production and 1.0 percent gain in manufacturing production, reported by the Federal Reserve, is a welcome relief from the last 18 months of bad news coming from the nation’s factories,” Meckstroth said. “A 20 percent increase in motor vehicle and parts production in July, largely coming from restarting post-bankruptcy GM and Chrysler factories, clearly helped. Excluding the auto industry, though, manufacturing production still increased 0.2 percent. The July rebound in manufacturing was relatively widespread since 12 of the 20 industries posted gains in production and this can be attributed to the fact that the pace of inventory destocking is reduced.

“We are encouraged by the July industrial production report and the other ‘green shoots’ that suggest that the manufacturing sector recession is finally bottoming out,” he added. “We believe an uneven and relatively modest pace of recovery is likely, but with an unemployment rate of 12.4 percent for manufacturing workers and near record low factory usage, the important point is that there was a change in direction towards improvement in business conditions.”

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