What's going on?

Despite becoming a smaller part of the economy in recent decades, �hard� industries, such as manufacturing and mining/oil production, remain an important part of the US economy. They�ve been under pressure in previous years, but their performance has improved this year – and data on Tuesday reinforced the idea that such industries are getting back on their feet.

What does this mean?

Two major factors weighed on industrial production in previous years: the plunging oil price caused a big decrease in activity in the energy industry and the significant increase in the value of the US dollar made it much tougher for US factories to sell goods overseas (and made importing foreign-made goods cheaper, i.e. tougher competition).


Both factors have reversed somewhat this year which, coupled with improved demand from US consumers for products like automobiles, has helped the industrial environment start improving modestly: �industrial production� experienced its largest monthly advance in July since November 2014.

Why should I care?

For you personally: Manufacturing is a small part of the economy � but it has a bigger secondary impact.
Manufacturing only accounts for about 12% of the US economy, but it also leads to non-manufacturing work being created (think: perhaps you�re an accountant that services an auto parts company). Undoubtedly, manufacturing has become less important to most economies in the developed world over recent decades � but that doesn�t mean it�s become unimportant!


The bigger picture: This is one obvious area where currency values have a big impact.
The rise of the US dollar in 2014 and 2015 had a materially negative impact on US manufacturing. Conversely, the significant fall in the value of the Euro over that time period helped European manufacturing. Similarly, China is trying to gradually devalue its currency versus the US dollar, partly so that its exports remain competitive in the global market.