May industrial production figures show only lackluster growth, are consistent with the modest-to-moderate economic growth we have seen for the past several years. What the economy is lacking is an improvement in business confidence, and that is not likely to come unless and until we see reforms that reduce regulatory burdens (especially those associated with Obamacare) and corporate income taxes. I think we will see movement in this direction before the end of the year, but for now things look pretty dull and unexciting.
U.S. industrial production has generally fared much better than eurozone industrial production over the past decade or so. In fact, eurozone production hasn't experienced any net increase for the past 13 years (since May 2000). Germany stands out as a relative powerhouse, but production there has been stagnant on balance since mid-2011, mostly as a result of the onset of the PIIGS sovereign debt crisis. It is encouraging to see that German production has enjoyed a sizable pickup in recent months, as this may be a leading indicator of a more widespread improvement in the eurozone economy after more than two years of declining output. U.S. industrial production growth has been lackluster, rising only 1.6% in the past year.
Abstracting from utility output, which has been roughly flat for the past seven years, manufacturing production was up a bit in May but up only 1.7% over the past year.
Production of business equipment has been doing a little better, posting 3.2% growth in the past year, but growing at only a 1.8% annualized rate in the past six months.