U.S. Factory Production Rises for Second Straight Month

factory production

One major component of the health of the American economy is factory production. While not as big a component as it used to be during the heyday of American manufacturing, factory output is still important and an avidly-watched statistic by economists and analysts.

According to Industry Week, factory production rose back in February for the second month in a row – registering a 0.2% increase in output. This comes on the heels of a 0.5% gain in January. The one-two combo was the first back-to-back increase in output since March and April of last year.

A rise in factory production means that education and training for manufacturing jobs – not just for up-and-coming students but also for professionals in the field now – is more important than ever to meet growing demand.

Demand Increases Amid Energy Price Rise

Demand for American manufacturing, spurred by an increase in demand for business equipment, grew despite a moderate increase in energy prices. This is important, since production hit a period of weakness toward the last quarter of 2015 and led some to think that manufacturing would continue a decline that was in effect for much of 2015.

The two-month growth comes in a world marked by tepid growth and waning momentum. The manufacturing sector has been struggling to break free of the malaise that has gripped the global economy, and so far, it appears to have done so – at least for the first quarter of 2016.

Since manufacturing accounts for 12% of the total economy, any increase is welcome. Capacity in February stood at 76.1%.

Projecting Manufacturing in 2016

Energy prices will be one of the biggest factors in determining how much growth manufacturing will see over the next three quarters.

Energy prices plummeted in 2015, but over the past few months, they have started to rise again.  Natural gas, one of the primary fuels used for production, has dropped significantly in price over the past 12 months, even though it apparently bottomed out at the beginning of March and has started to slowly recover over the past few weeks.

The price of coal has followed the same trajectory, cratering from a high in 2007-2008 and falling sharply over the past six years to where it stands now, a fraction of where it peaked last decade.

Even more important than energy prices for manufacturing’s success, however, is global economic growth and demand, which have both been lacking over the past year. The U.S. still exports a massive amount of goods throughout the globe, which means global growth affects domestic producers.

Fortunately, global growth is projected to hit 3.4% in 2016 (up from 3.2% in 2015) and 3.6% in 2017. While not evidence of a red-hot market by any means, it is proof that the global economy is thought to be improving, albeit at a glacial pace at times.

How Demand and Education Are Related

More demand is a positive development for a beleaguered sector, but this demand can only be satisfied if the supply side of the equation is growing equally – and thanks to a lack of skilled workers for the manufacturing sector, that is in doubt.

At TTA, we understand the critical importance of educating and training new workers and current workers – to encourage more Millennials to get into manufacturing, for example. An increased emphasis on training is of paramount importance if the nation is to grow its manufacturing sector and restore some of the jobs that have been lost to offshoring and natural economic changes over the past few decades.

Lower energy prices and increased factory production will mean there will be a higher demand for education and skills training on all levels. It is up to educators, trainers, businesses, and government to work together to meet this demand.