American manufacturing is experiencing something of a dichotomy in its performance in the U.S. economy. Influences like the new tariffs on supplies like aluminum and steel threaten to slow down industrial production.
However, other factors like deregulation continue to bolster other areas of the industry. With that, U.S. manufacturing is seeing both growth and declines thus far in 2018.
Recent reports indicate that overall industrial production and output fell noticeably in the month of May and June. The blame for lowered production and output cannot all be put on the new tariffs, however. In fact, industry insiders note that the lower numbers are due in part to a major fire at a truck parts supplier.
However, other factors behind the slowed production and output is owed to rising energy prices and increasing inflation. These contributors caused manufacturing production to decrease from 0.2 in May to 0.8 in less than a month. This fall is particularly disappointing considering that production saw an increase of 0.9 percent in April alone.
The lowered numbers are of particular concern given that manufacturing accounts for 12 percent of the American economy. In fact, close to 8.5 percent of all American workers are employed in factories and production plants.
Further, industrial production takes into account not only the making of commercial goods like auto parts but also mining, drilling, electricity generation, and utilities. The recent decline in production is the biggest slump experienced in this sector since 2014.
To expand on this decline, statistics show that production of cars and auto parts fell by 6.5 percent in recent months. This lowered vehicle output can be directly tied to the new administration's tariffs on imported steel and aluminum. The tariffs are affecting prices, output, and exports.
The price index for raw materials rose to slightly more than 79 percent since the start of summer. This increase in price is a 0.2 percent difference from what the index was in April. It accounts for the 27th consecutive month of price increases for raw materials.
Another cause for alarm among industry insiders is the failure for current production to keep up with customer demands. Customer inventories are getting surprisingly low because of the slowed production and higher price indexes, which again are tied directly to the new tariffs.
In spite of the lowered rates of production and output for the summer of 2018, American manufacturers continue to hire more workers. In fact, some economists say that domestic manufacturing is showing strong numbers under the Trump administration with many companies increasing capital spending and hiring more employees thanks to deregulation, the recent tax overhauls, business incentives, and both strong domestic and global economies.
Further, statistics are showing that the demand for American manufacturing is on the rise particularly for goods like vehicles and machinery. More jobs continue to be added to the manufacturing sector of the economy.
As recently as May, more than 18,000 new manufacturing jobs were created. These new jobs brought the total number to 259,000 in the last year.
In fact, in the first quarter of 2018 alone, around 74,000 new manufacturing jobs were created. The rate of new hiring has increased by 2.7 percent since Trump took office.
While the new tariffs have undoubtedly jolted the current state of industrial production and output in American factories, it would appear that these companies are adjusting to them and still experiencing increased demands for their products. New hiring in production and manufacturing is expected to continue to increase at least through the end of the year.
American manufacturing continues to experience both marked periods of slumps and growths. Factors like fires at supplier locations and the new tariffs have slowed some of this past summer's output. However, they do not appear to have negatively impacted hiring or the creation of new manufacturing jobs. The demand for American manufactured goods continues to increase despite many customers' current inventories being low.
