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Is the Ukraine war affecting U.S. manufacturing?

Obviously, major wars take their toll on a country’s population. They also affect economies in distinct ways. For example, wars affect the manufacturing sector as firms ramp up production of military vehicles, munitions, and the like. The current war in Ukraine, while far away from the United States, may still be having an impact here, given that the United States has promised military equipment to Ukraine. Other countries have done the same and are also ramping up their own purchases. FRED has some related data (at least back to 1994) that may help show what’s happening on the manufacturing front.

The Manufacturers’ Shipments, Inventories, & Orders survey from the U.S. Census Bureau doesn’t detail the defense sector, but it does provide data on manufacturing with and without defense. So, we can graph the difference.

The first graph shows new orders. If the war was a complete surprise and governments are only now scrambling to acquire military equipment, we’d expect new orders to be significantly up. At the time of this writing, that does not appear to be the case. But maybe they had enough foresight and are taking deliveries now. The second graph looks at shipments. While there’s an increase, it appears to follow a trend that predates the Ukraine war quite a bit.

Another impact could be that the new demand for armaments is reducing manufacturers’ inventories. Our last graph looks at this, and inventories are actually up. Could this be in anticipation of increased demand in the near future? We can’t tell simply by looking at the graphs. So, in conclusion, we don’t see any hard evidence that this war has had any notable effect on U.S. manufacturing yet.

How these graphs were created: For each graph, start by searching FRED for the series (say, manufacturers inventories) adding the “defense” keyword to narrow the results. Once you have the graph, click on “Edit Graph,” add the other series by searching for the same keywords without “defense,” and apply formula b-a.

Suggested by Christian Zimmermann.

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