Friday, January 16, 2015

The U.S. has become an industrial powerhouse

One of today's headlines (December Industrial Production fell by 0.1%) misses the forest for the trees. The big story is that U.S. industrial and manufacturing production is leaving the rest of the world in the dust.


Nothing tells the story better than the chart above. U.S. industrial production (utilities, mining, and manufacturing) has surged while Eurozone industrial production has been stagnant at best. We've never seen anything like this before. Sure, U.S. industrial production fell a little in December—ups and downs from month to month are routine with this series—but it's up 4.9% in the past year.


It's no wonder that U.S. stocks have outperformed Eurozone stocks by over 50% in the past four years or so.


Abstracting from utilities (a warm December reduced utility output), manufacturing production rose 0.3% in December and is breaking new high ground.


Manufacturing production is up 4.9% in the past year. That's a lot more than the growth of the overall economy, which is likely to be just under 3%.


Business equipment production is charging ahead, up 7.5% in the past year!

4 comments:

Benjamin Cole said...

Japan's industrial ouput also sagged all through their 1992-2012 deflation. A strong yen had some role. Europe's industrial production sagging...and they are in deflation.
Maybe robust economic growth and deflation can co-exist in a modern economy...have not seen it yet.

William McKibbin said...

The good news is that deflation will raise the spending power (real working wages) of America workers, albeit at a tremendous cost. However, given the callous indifference of the US government to address real working wages, I suppose that 10-20% deflation is good news for workers (who can keep their jobs) -- I regret that deflation is clearly the tacit goal of the inflation hawks -- for example, I am sure that Scott would prefer deflation over inflation -- it's a banker thing...

William McKibbin said...

http://www.businessweek.com/articles/2015-01-16/can-the-us-stay-out-of-the-deflation-vortex

William McKibbin said...

PS: The US is not a military-industrial powerhouse, that's for sure...