Economists' Outlook

Housing stats and analysis from NAR's research experts.

The Latest on Industrial Production

In each Economic Update, the Research staff analyzes recently released economic indicators and addresses what these indicators mean for REALTORS® and their clients. Today’s update discusses the latest on industrial production data.

  • Manufacturing production set an all-time high in the past month.  This portends well for further employment gains in the broader economy, which will then support the real estate market.
  • The manufacturing sector plunged sharply a few years ago, with industrial production falling 18 percent in a short timeframe. Since then, slow but steady gains over the past four years have resulted in retouching the peak production activity.
  • Though nowhere near the prior peak, the production of construction-related supplies has risen by 23 percent from the low point of a few years ago.  Further increase is expected going into 2014 as housing starts will have to and will clearly improve because of the housing inventory shortage.
  • Even though manufacturing production is charting new highs, employment is not.  Manufacturing employment has only recovered only about a tenth of the job losses that occurred in the recession and further the total employment across all sectors is still below the level of five years ago.  Increased uses of automation and technology are leading to productivity gains, though at the expense of fewer workers getting hired.
  • The energy renaissance in North Dakota, Texas, and Louisiana, along with natural gas drilling in Ohio and Pennsylvania, are the principal sources of increase in industrial production.   Generally, oil is fungible and prices should equalize everywhere.  But due to too much production in the U.S. and due to an inability to export oil to foreign countries, U.S. oil prices are notably cheaper compared to the international oil price in the London exchanges.  Texas crude is $97 per barrel while London Brent crude is $111.
  • World events can move quite unexpectedly.  Whales were hunted down to near extinction during the time of Moby Dick.  After exhausting the Atlantic Ocean, whales from the south Pacific were hauled all the way to Nantucket, Massachusetts to extract whale oil, which was needed for lighting.  But the whaling industry and Nantucket soon crashed when oil was discovered in Pennsylvania.  What new energy source is around the corner in the future?

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