Manufacturing recession ending due to housing, inventories bounce - Business Insider

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Opinion | The manufacturing 'recession' in the US is about to come to an end. By Neil Dutta of RenMacLLC.

Context is important

While the weakness is somewhat shallower, it is more widespread. In 2019, the output from about 70% of the manufacturing sub-industries contracted. By contrast, it was closer to 50% in 2015.In other words, the last factory recession saw fewer industries contracting, but the contraction was deeper. By contrast, we now have a milder contraction spread across more industries. Manufacturing production follows the ups and down of inventories,.

Doing the math, getting inventories up to "where they should be" implies a boost to GDP growth of about 0.3 percentage points on average per quarter this year, a sharp positive swing. Of course, as inventories can often undershoot final sales, they can overshoot as well. Thus, as factories work to fulfill the increased orders the lift to manufacturing production can be substantial. will help to lead to a boost for manufacturing.

 

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