Saturday, 19 of August of 2017

Economics. Explained.  

Industrial Production

August 17, 2017

Industrial production rose 0.2% in July after having risen 0.4% in June.  Over the past year this series has risen 2.2% and is clearly on the upswing.  The year-over-year increase in the largest since January 2015 — 2-1/2 years ago.  The monthly gains sometimes seem disappointing, but the reality is that production is gradually picking up but the quickening, thus far, has been largely associated with oil well drilling.

Breaking industrial production down into its three major sub-components,  the Fed indicated that manufacturing production (which represents 75% of the index) declined 0.1% in July after having risen 0.2% in June. During the past year  factory output has risen 1.2% (red line, right scale).  It has clearly hit bottom.

The manufacturing category has been dragged down by recent cuts in the production of motor vehicles.  Manufacturing production ex motor vehicles has risen 1.7% in the past year.  Thus, factory output has been climbing, but its rate of increase has been curtailed by the recent slowdown in the sales and production of motor vehicles.

Mining (14%) output rose 0.5% in July after having risen 2.0% in June.   Over the past year mining output has risen 10.2%.  Most of the recent upturn in mining has been concentrated in oil and gas drilling activity  which declined 0.9% in July after having risen 6.8% in June.  The July drop follows gains in each of the previous thirteen months.  Over the course of the past year oil and gas well drilling has risen 100.3%.  The number of  oil rigs in operation continues to climb.

Utilities output  rose 1.6% in July after having declined 1.2% in June.  During the past year utility output has fallen 0.6%.

Production of high tech equipment declined 0.1% in after having fallen 0.4% in June.  Over the past year high tech has risen 3.2%.   The high tech sector sector appears to have gathered some momentum during the past several months. This may be an early indication that the long slide in nonresidential investment may be coming to an end which would, in turn, signal some upturn in productivity growth.

Capacity utilization in the manufacturing sector declined 0.1% in July to 75.4% after having risen 0.1% in June.  It is still below the 77.5% that is generally regarded as effective peak capacity.

Stephen Slifer


Charleston, SC

Leave a comment