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Alan Tonelson is a Research Fellow at the U.S. Business & Industry Educational Foundation and the author of The Race to the Bottom: Why a Worldwide Worker Surplus and Uncontrolled Free Trade are Sinking American Living Standards (Westview Press).
By One Measure, U.S. Manufacturing is Back in Recession
Tuesday, May 21, 2013
President Obama and other cheerleaders for America’s so-far-imaginary manufacturing renaissance may be catching a sizable break due to the common practice of focusing on the Federal Reserve’s seasonally adjusted industrial production data when measuring the sector’s health.
Not that these data are showing anything like an historic comeback for American industry. In fact, as shown in my latest (May 15) posting, domestic manufacturing is hovering perilously close to its second technical recession in a little over a year (http://americaneconomicalert.org/blogger_home.asp?Prod_ID=37#6398).
But the non-seasonally adjusted data are a good deal worse. They show that the second technical recession (a six or more month period during which manufacturing output has declined on net) has already arrived. And given the big revisions made recently in the Labor Department’s monthly employment data (which use the same seasonal adjustment methods), these non-seasonally adjusted manufacturing production figures deserve to be taken seriously.
To recap, the seasonally adjusted data show that inflation-adjusted U.S. manufacturing output fell on net from last February through October (an eight-month period), briefly recovered, and has now decreased on net for the past four months. Not great by a long shot, but still skirting a second technical recession.
The non-seasonally adjusted data show that real domestic manufacturing production is still suffering a net decline – and one that began last June. In other words, the sector by this measure has been in recession for nearly a year.
Moreover, this downturn is the second experienced by domestic industry since the beginning of 2012. For real production also dropped on net between March of last year through January, 2013, before rising again in February.
In addition, the non-seasonally adjusted figures reveal a recessionary slide for U.S. manufacturing that was slightly greater than that shown in the seasonally adjusted figures, and a rebound that has left it further behind the eight-ball.
According to the seasonally adjusted data, American industry’s real output sank by 20.52 percent from its pre-recessionary peak in December, 2007 through its trough in June, 2009. Since then, it’s come back by 20.22 percent, leaving it 4.45 percent lower than when the entire economy began turning south more than five years ago.
According to the raw figures, inflation-adjusted manufacturing output peaked a few months earlier – in June, 2007 – and fell by 21.96 percent through its trough in July, 2009. Since then, real manufacturing output has grown by 20.67 percent (a bit better than its performance in seasonally-adjusted terms). But the greater decrease leaves non-seasonally adjusted production 5.83 percent lower than at its former high.
At the same time, both sets of manufacturing production data make clear that the sector has lost nearly all the momentum it acquired roughly when the entire economy began its recovery, in the middle of 2009. By extension, that manufacturing comeback looks almost entirely cyclical.
A true industrial renaissance may one day emerge in America. But given that manufacturing’s cheerleaders have been predicting this boom for two full years, they seem much likelier to lose their rightly dwindling credibility a lot sooner.
Closer to Recession than Renaissance
Wednesday, May 15, 2013
The manufacturing figures released in this morning’s April Federal Reserve industrial production report showed that, despite claims of an imminent renaissance from President Obama and others, domestic manufacturing is heading towards its second technical recession (a cumulative six-month decline) in slightly more than a year.
The new results showed that, since January, the sector’s annualized inflation-adjusted output has expanded at a negligible 0.46 percent – perilously close to flat-line levels. Last year, real manufacturing production grew by 2.61 percent from January through December.
Measured on a monthly year-on-year level, manufacturing’s real growth has slowed from 2.38 percent in January to 1.72 percent in April.
As a result, domestic manufacturing output still remains 4.45 percent below its pre-recession peak – achieved more than five years ago – despite trillions of dollars of economic stimulus from the federal government and the Federal Reserve, and despite the bailout of two of the three Detroit automakers.
This morning’s manufacturing production figures revealed that inflation-adjusted production has now fallen for two straight months, and the report revised downward the figures for February and March.
Durable goods production fell 0.62 percent below March’s level, and also declined for the second straight month. These industries are now growing at a 1.63 percent annualized inflation adjusted rate – less than half as fast as last year’s 3.93 percent January-December expansion.
On a monthly year-on-year basis, real durable production is down from 3.46 percent in January to 2.31 percent in April. ?As a result, inflation-adjusted output in this sector remains 0.29 percent below its pre-recession peak.
Non-durable goods production was down only 0.06 percent from March levels in real terms, but was also lower for the second straight month. Inflation-adjusted output in these industries is now down 0.28 percent so far since January, which means that it is decreasing at a 1.12 percent annualized rate. In 2012, non-durable goods production rose 1.14 percent in real terms. Real output in this sector is down 9.64 percent from its all-time high, also reached more than five years ago.
Most major manufacturing sectors saw monthly declines in March, including primary metals, fabricated metals products; machinery, electrical equipment and appliances; motor vehicles and parts; aerospace; and paper. Gainers included computer and electronics products; plastics and rubber products; and chemicals.
Other recent data also strongly signal that American industry still faces daunting competitive challenges. These include a record annual manufacturing trade deficit for 2012, and rising import penetration. This latter trend has just been documented in two new studies from the U.S. Business and Industry Council study – on global and Chinese import penetration rates in advanced U.S. manufacturing markets. Links to both reports can be found on the homepage of AmericanEconomicAlert.org.
Today's manufacturing production figures once again show that the reindustrialization needed to fuel a stronger and more sustainable economic recovery will still require much greater policy changes than so far proposed by either the President or either party in Congress, especially on international trade.
In particular, the new data make clear that President Obama needs to rethink dramatically his pursuit of a Trans-Pacific Partnership with many highly protectionist countries in East Asia. If this deal replicates the results of previous U.S. market-opening efforts in the region, it will boost the U.S. deficits in overall trade and manufacturing trade, and put domestic industry under even more pressure from predatory foreign competition.
Japan Joins the Currency Manipulation Party -- At America's Expense
Tuesday, May 14, 2013
The April import price data signal that U.S. domestic manufacturing is now under attack from two major Asian protectionist powers, with Japan joining China on the currency manipulation front, and both countries’ longstanding trade barriers and subsidies still firmly in place.
As a result, they cast major doubt on President Obama’s plans to pursue a Trans-Pacific Partnership with Japan and other Asia-Pacific countries that currently has no plans to address exchange rate protectionism, and no convincing strategy to eliminate the formidable nontariff trade barriers and other predatory practices in which the region has specialized for so long.
According to the Bureau of Labor Statistics new figures, the prices of U.S. imports from Japan – overwhelmingly manufactures – have fallen by 1.26 percent since January, when the Bank of Japan announced its initial decision to endorse new Prime Minister Shinzo Abe’s new economic strategy with a massive campaign of monetary easing and consequent yen depreciation. During 2012, these Japanese import prices rose 0.49 percent.
This 2013 decrease in Japanese import prices is nearly than five times greater than the 0.26 percent decline in overall manufactures import prices so far this year.
Major effects are starting to be seen on the trade front. Although both U.S. merchandise imports from Japan and the bilateral U.S. goods trade deficit are still both down so far this year from 2012 levels, the newest monthly (March) figures dramatically reversed that trend. They show that U.S. goods imports from Japan rose 10.49 percent from February, and the U.S. trade shortfall increased by 10.71 percent.
By contrast, March saw monthly overall U.S. manufacturing imports of just 6.27 percent, and declines in the overall manufacturing trade deficit, and the merchandise deficits with China and the Pacific Rim overall. One conspicuous exception – new free trade partner Korea, with which the United States has run rising goods deficits, stemming from greater imports and fewer exports, during the agreement’s first year in effect.
The new import price figures also continue to belie widespread claims from President Obama and others that U.S. domestic manufacturing is staging a stunning comeback largely due to declining Chinese price competitiveness.
Prices of manufactures-dominated imports from China in April fell more slowly over March levels (by 0.10 percent) than prices of manufactures imports overall (0.26 percent). The year-on-year decline in Chinese import prices has also trailed the global manufactures totals – 0.90 percent versus 1.43 percent. But Chinese import prices have been falling since February, 2012, despite the rising cost claims.
And although the growth of China’s manufacturing-dominated trade surplus with the United States has slowed, it is still running 3.02 percent ahead of 2012’s pace – more than the 2.34 percent increase in the overall U.S. global manufactures deficit during this period.
A Big Upside Jobs Surprise -- But Not in Manufacturing
Friday, May 03, 2013
This morning’s manufacturing jobs data reveal that the sector has created slightly more net new jobs in recent months than initially estimated, but also that American industry continues to trail the rest of the economy in employment gains as the recovery slowly proceeds.
As a result, the data make clear that if he wants to achieve a genuine domestic manufacturing revival, President Obama is going to have to stop simply talking about it and make major economic policy course changes. Chief among them – scrapping pursuit of production- and job-killing trade deals like his proposed Trans-Pacific Partnership, responding effectively to currency manipulation and other predatory trade practices by China and other major American economic competitors, and dramatically expanding the Buy American regulations covering federal government procurement.
Although this morning’s data show a flat-lining in manufacturing job gains during April, they revised the previous February figure up by 4,000, and the March figure up by 9,000. As a result, manufacturing employment gains for those months were revised upwards as well – from 19,000 to 23,000 for February, and from a loss of 3,000 jobs in March to a 2,000 increase.
Nonetheless, the same figures also show that the pace of manufacturing job gains has slowed significantly, from an average of 11,000 in the previous six months to zero in April.
Moreover, this morning’s data document that manufacturing has created only 8.51 percent (524,000) of the 6.154 million total nonfarm jobs created by the U.S. economy since the sector’s employment level bottomed in early 2010. As a result, manufacturing’s share of total American employment has sunk to 8.85 percent – below the level it hit at its recession nadir (8.86 percent), and far beneath its 9.96 percent share when that downturn began at the end of 2007.
Trading Industrial Places with China
Wednesday, April 24, 2013
Here’s a real “trading places” story (apologies to Clyde Prestowitz, author of the noteworthy study of U.S.-Japan trade relations of the same name) involving the United States and China -- and one that speaks volumes about the fallen state of the American economy that globalization policy blunders have helped create.
Back in 1997, then-Vice President Al Gore traveled to Shanghai and proudly watched as General Motors signed an agreement to enter a joint venture in China to build Buicks. Sensitive to Americans’ fears of trade-related job loss, Gore touted the agreement as a great opportunity for U.S. workers to supply these Chinese-assembled autos with tanker-loads of high-value American-made parts. The alleged bottom line: a big bonanza for U.S. exports, domestic auto workers, and the U.S. economy on net.
Neither Gore nor anyone else mentioned that the deal required the cars to be 80 percent Chinese-made within five years, and that lots of the non-Chinese-made parts would be coming from non-American suppliers.
But no matter. The con job worked because it reinforced beliefs widespread in the U.S. media, academic community, and the government officials relying on them for information that expanded trade and investment with countries like China would promote production-sharing arrangements in which Americans did most of the better-paid brain work, while low-paid Asians would be left with the scutwork.
Fast forward to about a week ago. Finishing up a trade mission to China, California Governor Jerry Brown proudly announced a deal that would enable a Chinese company to build electric buses in Lancaster, just north of Los Angeles. According to the Los Angeles Times coverage (at http://articles.latimes.com/2013/apr/16/local/la-me-brown-buses-20130417), the buses will be built from “parts made mostly in China.”
In other words, the operation will be a great opportunity for Chinese workers to supply these American-assembled vehicles with lots of high-value Chinese-made parts. The clear bottom line: more U.S. imports from China, higher bilateral trade deficits, and more American debt.
To add insult to injury, this first Chinese-owned vehicle operation in the United States will be subsidized by American taxpayer dollars that back green energy programs. And the winning Chinese company was awarded a bid over competitors that included a company based in South Carolina. "Manufacturing renaissance," anyone?
Manufacturing Renaissance Still MIA, Say New Industrial Production Figures
Tuesday, April 16, 2013
The manufacturing figures released in this morning’s March Federal Reserve industrial production report showed the second decline in real output in the last three months but, more important, add to the evidence that a genuine manufacturing renaissance remains nowhere in sight.
The new results, which revealed a 0.10 percent month-to-month dip in real manufacturing output in February, also revised the January decline downward and the February gain upward. The figures continue a pattern of fluctuating readings registered by American manufacturing since its inflation-adjusted output ended a 7-month cumulative decline at the end of last year.
Indeed, the year-on-year figures generally show domestic industry output improvements have been rising during the first quarter – from 2.25 percent in January to 2.94 percent in March. But those rates are considerably slower than the comparable 4.58 percent and 3.97 percent yearly 2011-2012 growth rates registered in January and March, respectively.
Overall, inflation-adjusted manufacturing production, which sank by 20.52 percent during the recession, is still 3.93 percent below its level when the Great Recession began in December, 2007 – despite literally trillions of stimulus dollars poured into U.S. economy by the Bush and Obama administrations and the Federal Reserve.
Durable goods production, a majority of manufacturing output, fell by 0.18 percent in March in real terms, reversing an excellent upwardly revised gain of 1.55 percent in February. January’s decline was revised downward to 0.53 percent.
During the first quarter, real year-on-year durable goods production has improved slightly, from 3.36 percent growth in January to four percent growth in March. Yet these gains, too, are smaller than their 2011-2012 counterparts – which hit 7.63 percent and 7.13 percent, respectively.
Durable goods output, which nosedived by 26.73 percent during the recession, is now only 0.43 percent greater than at its pre-recessionary peak more than five years ago.
Real non-durable goods production edged up 0.01 percent, also reversing a downwardly revised 0.28 percent increase in February. January’s small decline was revised upward to a smaller gain. During the first quarter, year-on-year non-durable goods production has improved from one percent in January to 1.76 percent in March. Breaking with the rest of manufacturing’s pattern, this growth was not substantially different from 2011-12 growth.
Inflation-adjusted output of non-durables, which fell by a relatively small 14.31 percent during the recession, is still 9.32 percent below is pre-slump peak in July, 2007.
Most major manufacturing sectors saw monthly declines in March, including primary metals, fabricated metals products; computer and electronics products; electrical equipment, components, and appliances; aerospace and miscellaneous transportation equipment; plastics and rubber products; and paper. Gainers included machinery, motor vehicles and parts, chemicals; and textiles.
Other recent data strongly signal that American industry still faces daunting competitive challenges. These include a record annual manufacturing trade deficit for 2012, and rising import penetration. This latter trend has just been documented in two new studies from the U.S. Business and Industry Council study – on global import penetration rates in advanced U.S. manufacturing markets (available at http://americaneconomicalert.org/USBICImportPenetrationReport2013Final.pdf), and on import penetration rates recorded by products from China in these high-value American industrial markets (available at http://www.americaneconomicalert.org/Chinaimportpenetrationreport30132.pdf)
As a result, the reindustrialization needed to fuel a stronger and more sustainable economic recovery will still require much greater policy changes than so far proposed by either the President or either party in Congress, especially on international trade.
The Manufacturing Boom Fairy Tales Continue
Monday, April 08, 2013
As usual, I was pleased the week before last when I got a call from Associated Press reporter Tom Raum seeking the U.S. Business and Industry Council’s views on whether American industry really is reviving, and whether the economy is making satisfactory progress towards President Obama’s goal of doubling U.S. exports during the 2009-2014 timeframe.
AP is the world’s leading news-gathering organization, and its material gets widely published not only in the United States, but around the world. So even when our perspectives are only one of several presented, USBIC and domestic manufacturing is that much better off.
Once the article was published, however, the downside that can result from such AP coverage was revealed. First, the common journalistic practice of taking seriously all seemingly respectable viewpoints produced a highly misleading picture of American manufacturing’s health – and one that is now all over the internet. Second, the excellent grade awarded by the article to America’s export performance was based on the wrong data.
As is typical for journalism, this AP article portrayed the manufacturing revival issue as a simple he-said, she-said clash of opinions. But at least in this instance, this venerable practice badly misinformed readers. What I told Raum is that a U.S. manufacturing renaissance is showing up nowhere in any of the most reliable data that are commonly used to measure economic performance. That is, there is nothing to indicate that manufacturing -- including manufacturing employment -- has experienced anything more than a cyclical rebound from a very deep recessionary dive. Indeed, if anything, these statistics depict a domestic manufacturing sector that continues to struggle against foreign competition
As I specified, this is true for the US output data, the US trade balance data, the global output data, the import penetration data, and a great deal more. And it’s easy to verify these points. In other words, the no-renaissance statements are not debatable premises or beliefs. They are descriptions of facts – at least according to economic statistics that are usually treated as authoritative in government as well as in the media.
A series of individual instances of reshoring has been widely reported by the media and touted by the Obama administration and other manufacturing cheerleaders. But the data -- which always deserve priority over individual events -- offer no indication that these anecdotes add up to a trend.
They might do so someday. And that will be well worth reporting. But that day has not yet arrived, and this overriding point should have been made clear. Certainly, moreover, such a reference was much more important to include in the article than the reasons for optimism that were dutifully listed, but that have not produced the predicted results.
Just as problematic is the article’s conclusion that the nation is about halfway toward Obama's export-doubling goal. After all, the president's objective must be reached within five years. Three of those years (60 percent) have now passed, and exports according to the data presented are less than halfway there.
But in fact, even that analysis is completely off base. For the export figures provided in the story are pre-inflation dollar figures. Economic growth is most widely reported, and most widely followed, in post-inflation dollars. So therefore, the most important trade figures are the inflation-adjusted trade figures. As I'd told Raum, these data show that, from 2009 through 2012, U.S. exports of goods and services combined are only up 22.6 percent. That figure should have at least been mentioned.
I was glad that Raum’s article specified that U.S. export growth has slowed considerably and that, as I observed, global headwinds are picking up, not slackening. But overall, the piece neglected to distinguish between belief and reality, and failed to take inflation into account. As a result, a great opportunity for public education turned into yet another exercise in happy talk.
An Economy Still Far from Being "Built to Last"
Thursday, March 28, 2013
The new fourth quarter 2012 U.S. economic growth estimates, which provide complete readings for the year, show an American economy and its growth rates still dominated by personal consumption and housing – the toxic combination whose expansion inflated the last decade’s disastrous bubble. Indeed, the fastest growing sector of the U.S. economy in 2012 was housing – up 12.1 percent.
As a result, the nation remains worrisomely far from achieving President Obama’s vitally important goal of creating “an economy built to last” – i.e., reliant mainly on producing and earning, rather than borrowing and spending, for its growth.
Real personal consumption growth slowed down in 2012 – to 1.9 percent from 2011’s 2.5 percent. Moreover, the combined contribution to growth produced by these two sectors fell from 97.8 percent to 72.3 percent. But the economy’s continuing subpar performance indicates that, since recovery from the financial crisis began (in mid-2009, officially) no substitutes for personal consumption and housing have been found to spearhead adequate levels of growth.
Indeed, the growth of business spending slowed between 2011 and 2012, from 8.6 to 8.0 percent. Its contribution to growth declined from 4.4 percent to 3.6 percent during this period. Net exports showed a similar trend. Their annual real improvement fell from 2.9 percent to 1.8 percent, and their contribution to growth dropped by more than 50 percent – from 3.9 percent to 1.8 percent.
On a static basis, personal consumption and housing combined comprised 73.35 percent of real GDP in 2012 – down just fractionally from their 73.36 percent in 2011 and only slightly lower than their dangerous level of 73.81 percent – as the bubble decade was coming to an end and the last recession was about to begin.
The business spending share of real GDP rose from 10.4 percent to 11 percent, but obviously did not increase fast enough to spark satisfactory growth. The same holds for the real trade deficit (net exports), whose share of real GDP dipped from 3.1 percent to 3.0 percent.
At the same time, the growth of the real trade deficit from its mid-2009 annualized level of $322.8 billion to its full-year 2012 level of $400.7 billion reveals that trade flows have undermined the U.S. recovery since its technical beginning.
The new GDP figures also permit an evaluation of progress made towards the President’s goal of doubling U.S. exports between 2009 and the end of 2014. So far, real exports have risen only 22.6 percent since 2009. Moreover, it is critical to point out that changing trade flows cannot produce any growth or hiring through expanding exports alone. Only net export improvement (trade deficit reduction) can achieve those goals. Since the recovery’s beginning, however, U.S. trade flows have been moving in exactly the opposite direction.
Why Bernanke is Wrong About Global Monetary Easing
Tuesday, March 26, 2013
Federal Reserve Chairman Ben Bernanke’s speech in London yesterday attracted the most attention because of his claim that the Fed’s historically unprecedented, super-easy money policies don’t amount to a sneaky way to cheapen the dollar artificially to create trade advantages for America.
In other words, Bernanke was defending himself and the United States from charges that both are really engaged in the same kind of currency manipulation practiced by China – and by many countries in the 1930s that allegedly kneecapped world trade flows and deepened the Great Depression.
Much more interesting, important – and troubling – than Bernanke’s protestations was their underlying rationale. The Chairman claimed that, far from being disguised, trade-destroying protectionism, America’s easy money policies would achieve exactly the opposite effects. They would stimulate Americans’ demand for goods and services of all kinds, including imports. Even better, similar policies by other central banks would spur global demand for U.S.-made goods and services for similar reasons. And presumably a new economic Golden Age would ensue.
But here’s the gigantic fly in the ointment. Easy U.S. money undoubtedly will stimulate lots of U.S. importing. It already has. But easy foreign money won’t stimulate comparable foreign imports – of U.S.-made or any other goods. The reason? The economies of most of America’s trade competitors are still systematically shielded by the kinds of trade barriers that the United States dropped long ago, or never erected.
As a result, the likeliest effect of the global easing Bernanke is celebrating will be to worsen America’s trade deficit greatly, balloon the nation’s already bloated debts, and supercharge the trade and financial surpluses of the world’s protectionists.
In turn, today’s worldwide easy money will wind up recreating the humongous global imbalances that most knowledgeable observers – including Bernanke! – believe ultimately led to the financial crisis and Great Recession. The only major differences between this scenario and the last decade’s? The imbalances will be even bigger, meaning that the resulting collapse will be even more destructive.
Not that Bernanke’s is the only top world leader or even top U.S. leader, with this blind spot. President Obama’s first National Economic Council chief Larry Summers made a similar same mistake early in the president’s first term during the crisis’ earliest and most dangerous phase. He explicitly – and successfully – argued that reviving global growth through government stimulus programs was more important than ensuring that such growth was better balanced and therefore less dangerous than bubble era growth.
Summers, the rest of the Obama administration, and the nation and world lucked out in this strange and less than optimal way. A second crisis was avoided -- but only because the resulting U.S. recovery so closely resembled further stagnation.
Many of that period’s obstacles to reigniting credit-fueled American growth, however, have been cleared away or at least reduced for the time being – mainly transparently excessive leverage in the financial and household sectors (as opposed to the subtler and even hidden forms of excessive leverage remaining today).
In other words, because it neglects the government barriers still massively distorting global trade and therefore investment flows, easy-money success by Bernanke and his fellow central bankers could produce successes everyone may come to regret deeply.
Manufacturing Growth Settled in See-Saw Pattern
Wednesday, March 20, 2013
The manufacturing figures released in last week’s February Federal Reserve industrial production report represent an improvement from January’s 0.33 percent decline, but indicate that American industry still is stuck in neutral.
The new results, which revealed an 0.82 percent month-to-month increase in real manufacturing output in February also revised the December gain upward and January’s decline downward. But the figures continue a pattern of fluctuating readings registered by American manufacturing since its inflation-adjusted output ended a 7-month cumulative decline at the end of the year -- a technical recession.
Indeed, the year-on-year figures generally show domestic industry output improvements are on a downward glide path. According to last week’s data, real manufacturing production rose by 2.34 percent from February, 2012 to February, 2013. That rate is slower than the 2.41 percent January-January output increase, and considerably less than the 3.87 percent December-December improvement.
In addition, the 2.34 percent February, 2012-February, 2013 manufacturing production rise represents a major deterioration from the 6.02 percent February, 2011-January, 2012 gain, and the 6.99 percent jump achieved from February, 2010-February, 2011.
The February figures also reveal greater strength since early fall – real manufacturing production fell 1.14 percent between September and October. But February’s results are also weaker than the 1.71 percent increase achieved from October to November, and the 1.29 percent growth of the following month.
Overall, manufacturing production is still three percent below its level when the Great Recession began in December, 2007 – despite literally trillions of stimulus dollars poured into U.S. economy by the Bush and Obama administrations and the Federal Reserve.
Durable goods production, a majority of manufacturing output, rose an excellent 1.24 percent in February, reversing the 0.48 percent decline in January, and improving on the 1.15 percent gain in December.
On a February-to-February basis, however, the real increases in durable goods output have fallen from 11.68 percent in 2011, to 9.02 percent in 2012, to 2.34 percent in 2013. Durable goods output, which nosedived by 27.17 percent during the recession, has now after 62 months finally topped its December, 2007 level, when the recession began.
Non-durable goods production rose 0.33 percent in February, also reversing a January decline (of 0.15 percent) but falling far short of its 1.46 percent December jump. On a February-to-February basis, the increase in real non-durable goods production has changed from 2.07 percent in 2011 to 2.77 percent in 2012 to 0.73 percent in 2013.
Inflation-adjusted output of non-durables is still 7.90 percent below its pre-recession peak in July, 2007.
Most major manufacturing sectors saw monthly gains in February, including fabricated metals products, machinery; motor vehicles and parts; computer and electronics products; electrical equipment, components, and appliances; plastics and rubber products; chemicals; and paper. Decliners included aerospace and miscellaneous transportation; primary metals; and textiles.
Other recent data strongly signal that American industry still faces daunting competitive challenges. These include a record annual manufacturing trade deficit for 2012, and rising import penetration, as just documented in a new U.S. Business and Industry Council study (available at http://americaneconomicalert.org/USBICImportPenetrationReport2013Final.pdf).
As a result, the reindustrialization needed to fuel a stronger and more sustainable economic recovery will still require much greater policy changes than so far proposed by either the President or either party in Congress, especially on international trade.
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