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Summary
A broad-based increase in almost every category of manufacturing output despite only a slight improvement in supply chain dynamics offers a peek at the potential boom in American manufacturing if the bottlenecks in global supply lines could be cleared. The impact of Russia's invasion of Ukraine, while mostly not reflected in this February report, could worsen supply problems, but our analysis suggests only minimal direct exposure for manufacturing.
Manufacturing getting back on it's feet
U.S. industrial production increased 0.5% in February (chart) as incremental improvement in supply chains gave businesses (mostly manufacturers) the wherewithal to start chipping away at backlogged orders. Manufacturing output rose 1.2% in February, the largest single-month increase since October. Remarkably, this happened despite a 3.5% drop in motor vehicles and parts production. It was the third straight monthly decline for this industry, which has become synonymous with the supply chain crisis. Other manufacturing categories are seeing some improvement–or were seeing improvement in February (see the section below for potential war impact.)
Durable goods industries like primary and fabricated metals as well as nonmetallic mineral products and wood products all posted monthly gains of 2% or higher in the month. Every category within non-durable industries was either fiat or posted gains as well with the largest increase of 3.0% coming from apparel and leather. Yesterday's retail sales report saw again in clothing store sales in February as well. The fact that the return to the office is occurring alongside increased output and spending on clothing and apparel suggests something similar to back-to-school shopping for the grown-ups.
After a 10.4% weather-induced surge in January, utility production slowed 2.7% in February. That is not much of a giveback; we could be due for another decline in the current month. Mining output edged up 0.1%.
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