Wednesday, February 18, 2009

U.S. Manufacturing Production Below 2002 Average

U.S. Industrial production fell another 1.8% in January, following several months of steep declines. And it would have been worse if cold weather in the North East hadn't lifted energy production (utilities). Manufacturing alone fell 2.5% while the December number was downwardly revised by 0.7%. As a result the index level fell below 100. 100 represent the lowest annual average in the previous cycle, which is to say 2002. Thus, the entire increase in production during the previous boom has been swept away.

Another detail which illustrates the depth of the manufacturing slump is that capacity utilization fell to 68%, lower than the 68.5% low reached in the 1982 recession. Capacity utilization is thus at its lowest level since the 1930s.


Anonymous Anonymous said...

(I hope this question is not entirely off tangent to this post...)

What do you make of countries who largely abandon manufacturing in favour of service industries? There's the law of comparative advantage, but would this make the country more vulnerable to 'external shocks'? Some people still rue Thatcher for 'destroying' Britain's manufacturing base.

9:02 AM  
Blogger stefankarlsson said...

Well, given the fact that manufacturing is a lot more cyclical than service industries, that argument is completely false. If anything, the reverse is true, that increased reliance on service industries will reduce vulnerability to shocks.

10:21 AM  

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