Industry evidence of enhanced production stability since 1984

McConnell and Perez-Quiros have recently provided evidence that the growth rate of GDP has stabilized since 1984. They conclude that the enhanced stability can be attributed to improvements in inventory management in the durables sector. This study examines the behavior of output in two-digit SIC manufacturing industries in an effort to determine whether this increase in stability is evident in less aggregated data. After accounting for changes in demand volatility, output stabilized in four of the six 2-digit durables industries modeled here. Total durables output stabilized by 9%. These improvements appear to be the result of milder short-run output responses to demand shocks. This suggests that output has become less responsive to demand shocks and casts doubt on enhanced flexibility of production that should be characteristic of improved production management.