Wednesday, 17 of October of 2018

Economics. Explained.  

Industrial Production

October 16, 2018

Industrial production rose 0.3% in September after having risen 0.4% in August.   During the past year industrial production has risen 5.1%.  A growth rate of that magnitude was last seen in November 2010.  So despite monthly wiggles, production continues to trend upwards.

Breaking industrial production down into its three major sub-components,  the Fed indicated that manufacturing production (which represents 75% of the index) rose 0.2% in September after having risen 0.3% in August.  During the past year  factory output has risen 3.5% (red line, right scale).    The factory sector is clearly gathering considerable momentum.

Mining (14%) output rose 0.5% in September after having climbed 0.4% in August.  Over the past year mining output has risen 13.4%.  Most of the recent upturn in mining has been concentrated in oil and gas drilling activity.  Oil and gas drilling fell 1.4% in September after having declined 0.5% in August.     Over the course of the past year oil and gas well drilling has risen 13.5%.

Utilities output was unchanged in September after having risen 1.1% in August.  During the past year utility output has risen 5.4%.

Production of high tech equipment jumped 0.6% in September after having risen 0.3% in August.  Over the past year high tech has risen 6.9%.  Thus, the high tech sector sector appears to be expanding nicely. This is an indication that the long slide in nonresidential investment has come to an end which would, in turn, signal an upturn in productivity growth.

Capacity utilization in the manufacturing sector rose 0.1% in September to 75.9%%.  It remains below the 77.4% level that is generally regarded as effective peak capacity.  However, factory owners will soon have to spend more money on technology and re-furbishing or expanding their assembly lines to boost output.

Stephen Slifer


Charleston, SC

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