United States industry

Main article: US economy

2023

Growth of 0.2% at the end of the year due to oil and gas production. Stagnation of industry continues for 15 years

The growth of the industry for the year was 0.2%, where the manufacturing industry decreased by 0.6%, in which the production of long-term goods increased by 0.2%, and the production of intermediate products and short-term goods decreased by 1.3%.

With weak processing, the stabilization of the industrial sector is ensured by mining, which grew by 4.8% over the year, where the US oil and gas sector made an almost entirely positive contribution, reaching record production.

Electricity and utilities declined by 1.6%.

Among the industries in the worst position is the production of furniture (low demand for real estate), where the fall for the year is one of the record - 8.6%, the situation in the production of clothing, paper products, woodworking and publishing is poor.

The situation in oil products and petrochemicals is quite good (by the standards of the United States and the capacity of the industrial sector) with annual growth in the range of 1-1.3%, and the computer and electronic industries are best of all - an increase of 2.2%, the automotive sector - 5.9%, the aerospace industry and the production of other types of transport - 3.8%.

After two years, it can be admitted that the military-industrial complex in the United States was never launched. Yes, this is not the 1940s, when industry during the war years grew three or more times (now the capacity is different and the conditions are different), but there is not even a visible change.

Segment "Aerospace and transportation equipment," which includes all moving types of military-industrial complex relative to 2019 in the minus by 2.7%!

For four years, the industry has grown by 0.3% and about the same in 15-16 years, i.e. it is fair to talk about stagnation at a high base, but there is no talk of any breakthrough or transition to a new dimension.

In general, the real sector of the US economy is in prolonged stagnation, all growth in the "virtual, digital space."

Labor productivity in the US industry has not grown for 10 years

The industry and production optimization limit USA in reached its peak in 2010. Over the past 10 years, labor productivity in the mining and manufacturing industries has not changed.

The historical peak of productivity growth in the 10-year trend was achieved in 2006 (over 50% increase over 10 years).

Labor productivity in industry is primarily influenced by technologies and equipment within the framework of the introduction of automated complexes (at the level of production, monitoring and planning) and the introduction of highly efficient, high-performance production equipment.

Productivity is also affected by the organization of labor (organization of production flows, effective distribution of tasks and resources), which is achieved, including through digital technologies. In this aspect, AI can bring a certain improvement, but at the moment there is no progress at the macro level, Spydell Finance wrote.

Production and personnel management (administrative/management factors) do not have a significant impact due to the lack of significant changes in corporate governance over the past 20-30 years.

Infrastructure in the United States reached its peak in the middle of the 20th century and then moved more towards degradation.

The qualifications/competence of employees, as well as motivation for work, are clearly reduced and this factor impairs productivity.

Macro-scale productivity can be affected by industry shifts where industries with high productivity growth rates (pharma, biotech, semiconductors, aerospace, etc.) can replace industries with low productivity (woodworking, textiles, etc.).

Overall, industry productivity in the United States has reached its limit when factors contributing to a negative effect (employee qualification and motivation, infrastructure) balance factors with a positive effect (AI, high-performance equipment).

Moreover, in factors with a positive effect, the rate of progress has sharply decreased due to the achievement of physical efficiency limits.

U.S. defense industry faces uncertainty despite manufacturing "boom"

The American defense industry is experiencing a "boom" in ammunition production thanks to huge aid packages to Ukraine, Israel and Taiwan, which allows it to receive growing orders after several years of declining demand.

But despite the surge in funding, defence experts warn that uncertainty over future contracts means the sustained and long-term growth needed to supply the country's military - or its allies - is not guaranteed.

A new boom in industrialization in the United States

As of June 2023, there is an unprecedented construction boom in industrial infrastructure in the United States in modern history. Since February 2021, the cost of building industrial infrastructure has grown 2.6 times, which is the most powerful infrastructure impulse in at least 30 years.

In August, construction costs in the United States reached $198 billion on an annualized basis, up nearly 66% from the previous year, the highest since the Bureau of Economic Analysis began tracking the data in the 1950s.

This is an attempt by Washington to catch up with China in making zero-emission cars and regain leadership in the semiconductor industry.

In the United States, there were two cycles of capital spending on industrial infrastructure - from July 2004 to February 2009 (4.5 years) - an increase of 3.3 times and from February 2011 to June 2015 (almost 3.5 years) - an increase of 2.9 times. This time, the expansion cycle is more rapid and larger.

Construction costs in the Census classification include labor and materials costs, architectural and engineering work, overhead, interest and taxes paid during construction, and contractor profits.

Industrial infrastructure includes all buildings and structures at production sites, but does not include integration of non-stationary industrial equipment and production debugging, whereas stationary equipment is accounted for. Office buildings and warehouses owned by manufacturing companies but not built on the manufacturing site are classified as "office" and "commercial," respectively.

Spending on industrial infrastructure, as a share of the volume of non-residential construction by the private sector, increased to 29% - almost twice as much as in 2020. In relative comparison to the total volume of construction, priorities and phases of industrialization/deindustrialization are visible.

For example, from 1995 to 2002 there was an active phase of de-industrialization (shifting the priority to other types of construction), and in 2023 the industrial sector dominates as never before.

Largest revision of U.S. industrial manufacturing data in a decade to improve 2023 data

In the United States, in April 2023, one of the largest revisions of industrial production data in the last decade was carried out, which significantly transforms the perception of trends.

The Fed tracks the industrial production index (IPP) and annually in March makes an audit of data based on updated information from relevant departments, sometimes recombines the scales of industries in the structure of the IPP.

However, the performance in 2023 went beyond all the usual and reasonable boundaries, Spydell Finance wrote. For the first time, at least since 2009, a revision of the entire history of PPIs in the United States was made. The revision touched all the depth, starting in 1972.

From 1972 to 2000, the PPI was lowered by 0.2 pp compared to the old data. From 2000 to 2008, on average, about minus 0.1 percentage points, from 2009 to 2019 plus or minus at the same level as a small error, but from 2019 a strong spread went.

In 2019, the spread of data by month began to reach 0.2 percentage points, but was leveled at parity by year. In 2020, the monthly spread reached 0.4 pp, and on average for the year minus 0.25 pp, in 2021 the spread increased to 0.9 pp by months and a significant underestimation of 0.75% per year.

In 2022, the deviation of new data in comparison with the old began to reach 1.4 pp, and in the year it turned out that after the audit, industrial production was 1.2% LOWER than before the revision!

In the histogram of the industry comparison of new and old data, it can be seen that the strongest revision affected science-intensive industries: the production of computers and electronics in 2022 suddenly became 3% lower than in accordance with old data, the production of electrical equipment decreased by 2.9%, the production of cars and components in minus by 2.5%, and the grandiose revision affected the most complex and knowledge-intensive segment - aviation, aerospace production and precision weapons (immediately minus 11.2%!).

Source: Spydell Finance

Such a strong gap in Aerospace and transportation equipment is impressive, because it completely changes the interpretation of the conclusions on the main driver of American industry growth in 2022, since new data indicate a negative trend from August 2022.

As a result, the symbolic growth of the US industry by 0.5% YoY in March 2023 is due to a significant revision of the data for the worse in almost the entire history of the IPP, where in 2022 there was the strongest underestimation of the base - by 1.2 percentage points per year.

Through the understatement of the 2022 base, near-zero growth is formed in 2023, but in fact, the US industry has been stagnating since Q3 2022 with a formed downward trend in most industries in the processing segment.

So far, producing production is primarily oil and gas (over 5% YoY), oil and gas distribution (+ 10.9%), electricity generation (+ 3.1%).

In a serious negative, woodworking production by 9.5% is largely due to a decrease in the laying of new houses after the collapse of demand for residential real estate. Low-margin production in textiles, paper production and publishing is falling by 9-10%, but this trend has been going on for 20 years.

A knowledge-intensive segment went into contraction: mechanical engineering (minus 0.3%), computers and electronic components (minus 1.4%), electrical equipment (minus 3.2%), but the automotive industry is still in the black (plus 1.9%) due to the implementation of a huge stack of open orders in the period 2021-2022 after a shortage of chips and supply failures.

The advantage is aviation, aerospace by 3.4%, but the data for the last period was revised with a complete defeat of 11%.

Nonmetallic mineral is growing by 2.1% and 10.7% over two years, which includes cement, concrete, brick, glass, etc., which may be associated with the implementation of large infrastructure projects.

Given the supply-demand gap, there are all the factors that could drive industry growth in the US, which in theory could knock down inflationary pressures through increased supply of goods, but no.

Business does not believe in the sustainability of solvent demand, and international competition is difficult due to high domestic costs in the United States and lower productivity, plus the cost of funding is growing.

Keeping the U.S. and its allies in control of high-margin manufacturing

The apparent deindustrialization in many industries according to the industrial production index in the USA and Europe at the beginning of 2023 is a consequence not of the loss of industrial potential, but of the protracted procedure for withdrawing production from the internal circuit to the outside. The real industrial potential of the West is much higher, since production in Asia is taken into account as production in Asia, but is largely controlled by developed countries.

Core profits settle in the head offices of multinationals. At the same time, science-intensive, complex and/or high-margin production remains in developed countries. This is almost entirely the aviation industry, military-industrial complex, the production of high-precision equipment and electronics, partially the automotive industry, biotechnology.

Source: Spydell Finance

There is no talk of transferring low-margin production back to the United States and Europe according to the "Trump precepts," because they will have to compete in salary and productivity with Asian workers. However, science-intensive production is developing in Western countries.

Over the past three years, there has been a pronounced emphasis on knowledge-intensive production, which is growing at a rate significantly higher than the production of lower and middle technological structures.

The United States is building a post-industrial economy, where the contribution of industrial production is steadily declining.

The share of manufacturing in the US economy in terms of gross value added is 11.3% and another 1.8-1.9% production, i.e., in total, slightly more than 13% compared to 15.4% in 2008 and over 30% 50 years ago.

At the same time, it should be borne in mind that at least a quarter of the economy directly or indirectly serves industrial production (transport, construction, telecommunications, information, financial, legal, insurance, marketing, research and many other types of services).

The low share of industry in US GDP (about 13-13.5%) will be significantly higher when you consider all production outsourced to other countries, but controlled by American business.

2021:274 robots for 10,000 employees

List of countries with the highest density of robots per 10 thousand workers in the field of industrial production

2020: Sharp decline during the COVID-19 pandemic

Main article: COVID-19

US industrial production fell sharply in May 2020 amid the COVID-19 epidemic

2009: Shifting industrial clusters to India and Southeast Asian countries

Since 2009, priorities have changed dramatically and the development of industrial clusters has been shifted to India, Vietnam, Indonesia, Malaysia, Thailand. The main thing about this was that the value chain is directly or indirectly controlled by headquarters from developed countries. The center of industrial production and logistics in Asia, however, research centers, financial, legal departments, marketing department and administrative center remained in advanced economies.

2006: Peak industrial expansion outside the US with focus on China

Active expansion began in the mid-1980s, the peak of expansion in 2004-2007, and the total period of active expansion within globalization lasted more than 20 years. During this period, over 90% of industrial clusters were created in Asia, about 5% in Eastern Europe, Russia and the countries of the former CIS and about 4% in other regions. The greatest concentration was in China.

1970s: The beginning of the withdrawal of low-margin production to poor countries

The concept of industrial policy in the United States and advanced economies since the 1970s has been based on the withdrawal from the internal circuit to the periphery of low-margin production, which made it possible to effectively scale production by controlling costs.

1945:20% reduction in manufacturing in two years

When the outcome World War II was clear, from 1944 MILITARY INDUSTRIAL COMPLEX USA it began to dump power, and in 1945 the industry was 20% less than in 1943. In 1946, there was an even larger decline in industry - minus 30-33% of the 1943 level, and the recovery occurred only in 1953 at the expense of the private sector.

1943: Manufacturing production tripled during World War II

Since 1939, the military economy has been launched. From 1939 to 1943, at the height of World War II, manufacturing grew almost THREE times! This growth was almost entirely ensured by the state defense order.

1938: Manufacturing collapse by 22%

In 1938, the United States experienced a local crisis with a 22% drop in industrial production.

1932: Manufacturing collapses 47% in 3 years of the Great Depression

In the United States, the manufacturing industry suffered greatly during the Great Depression. The peak was in 1929, and in three years (1930-1932) the accumulated decline was a very sensitive 47%. From 1933 to 1937, the failure was almost completely compensated.