Manufacturing

The Louisiana economy can be divided into the categories shown below1. Of these, manufacturing is the largest sector of state wide output. The majority of the manufacturing sector is nondurable goods manufacturing. As a time series, manufacturing data are relatively stationary even though the amount of employment in this sector has dropped by more 30,000 workers over the time frame shown below.

Manufacturing Historical Data

The blue line shows the total value of manufacturing for the state for the past twelve years. The orange line directly below it is nondurable goods manufacturing. The difference between the two lines represents durable goods manufacturing. The comoving dynamics of these data suggest that the fundamentals of the manufacturing sector of the Louisiana economy are not relatively volatile. There appears to be a consistent ratio of nondurable goods manufacturing to total manufacturing for the past ten years. This ratio does not vary more than 5% over this time interval.

The same comoving dynamics that we observe in the level of manufacturing are also observed in the ratio of manufacturing to gross state product (GSP). These data indicate the overall volatility in the sector is driven by GSP volatility and not necessarily manufacturing volatility.

Manufacturing Forecasts

Forecasts2 for Louisiana manufacturing output are made from an aggregation of multiple statistical models designed to approximate the underlying data generating process of the available data. A Bayesian model averaging approach is used here to capture the joint uncertainty that any given model may be misspecified as well as to capturing the probabilistic uncertainty inherent in each individual estimate. Observed data is given in blue while forecasts are presented in orange. The weighted average of all models used is represented by the solid orange line. The upper bound and lower of the cone of uncertainty surrounding these estimates is represented by the dashed upper and lower lines respectively.

 

Nondurable Goods Manufacturing Forecasts

 


  1. The section labeled, “Other”, contains the following categories; Agriculture, Utilities, Educational Services, Arts, Management, IT, Administrative Services, Accommodation, and Real Estate. Each of these individual categories account for 3.5% or less of GSP.

  2. Forecasts are provided as a convenience and for informational purposes only without any explicit or implied warranty. The authors and publishers of this post and site bear no responsibility for the information provided here and cannot be held liable for any negative consequences that may arise due its publication. Forecasting the future is inherently a tricky proposition, and all forecasts have an error term attached to them. Please exercise caution when making financial and business decisions based on the information provided. Use this information as a single input into your decisions making process.

Patrick is an assistant professor of Economics at Louisiana Tech University. He researches interest rate determination and the inflationary consequences of suboptimal monetary policy. He teaches monetary economics, research methods & macroeconomic theory.