In August of 2014, SCDigest was reporting that at long last, US manufacturing output had finally again reached levels of the previous peak year, 2007, when the output index from the Federal Reserve climbed back the 100 level in July of 2014. (See US Manufacturing Output at Last Makes it Back to Pre-Recession Levels.)
Supply Chain Digest Says... |
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| The January level of US manufacturing output was 106.2, meaning it was 6.2% above the average month in 2012. That means the US has seen growth of actually a little less than 2% annually in the three years and one month since that baseline year ended. |
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However, after a significant revision to the data in 2015, that milestone evaporated, and US manufacturing production is still below 2007 levels some eight years later, indicative both of how deep the Great Recession that started in 2008 really was, and the sluggish growth in US manufacturing in recent years.
Every month, the Federal Reserve's produces several indices on US industrial output. The full number, which generally receives the headlines, includes output from utilities and mining as well as manufacturing.
As a result, it can be easily swung by changes in weather, with a cold January or hot July sending utility output soaring.
SCDigest generally focuses on the data for manufacturing only, without mining and utilities.
For several years, the baseline for the index was set to 2007 - then and now the peak year for US manufacturing output. The average month for that year was given a score of 100. The index was below that 100 level baseline starting in 2008, until finally reaching it again in July of 2014.
The measure then stayed above the 100 level every month - until the Fed changed its baseline year to 2012 in late 2015.
Along with that change in the baseline year also came some revisions, as happen from time to time, to the underlying data itself. And with that - poof - the recovery of US manufacturing to 2007 levels was gone.
As can be seen in the interactive graphic below, charting US manufacturing output data from 1990 through last month, the January level of US manufacturing output was 106.2, meaning it was 6.2% above the average month in 2012. That means the US has seen growth of actually a little less than 2% annually in the three years and one month since that baseline year ended.
But as can also be seen, that 106.2 level is still a couple of percentage points lower than at the monthly peak of US manufacturing output, which reached a level of 108.3 in December of 2007. It began to fall the very next month, eventually reaching a bottom of just 85.9 in June of 2009.
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Keep in mind, however, that this score is now relative to 2012 levels, meaning June 2009 output was about 14% below that new baseline year's production. If the comparison was still to the peak 2007 year, the June 2009 level would have been more like 80, meaning production was down about 20% from the peak year.
That is quite a steep drop.
This view obviously is for US manufacturing as a whole - there are significant variations by US industry sector, with some now reaching all-time highs in output, while other sectors have seen their high water marks many years ago.
We'll be back next week with that analysis - it is very interesting.
Are you surprised the US still isn't back to peak 2007 production levels all these years later? Let us know your thoughts at the Feedback section below.
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