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Economy in Brief

U.S. Industrial Production Softer in July on Weaker Utilities Output
by Sandy Batten  August 15, 2018

Industrial production edged up 0.1% m/m (4.2% y/y) in July but the 0.6% m/m rise initially reported for June was revised up to a sturdy 1.0% m/m increase. The consensus from the Action Economics Survey had looked for a 0.3% m/m gain. The softness in July was due largely to an unexpected 0.5% m/m decline (+2.4% y/y) in utilities production (the third consecutive monthly decline) along with a 0.3% m/m drop (+12.9% y/y) in mining activity. This was only the third monthly decline in mining output in the past 12 months. Manufacturing output was up a solid 0.3% m/m (2.9% y/y) in July.

The rise in manufacturing output was led by a 0.8% m/m (4.0% y/y) rise in the production of business equipment. This increase was widespread across major categories with output of transit equipment up 1.8% m/m, information processing equipment up 1.1% m/m, and industrial equipment up 0.1%. The production of oil and gas well drilling equipment slumped 3.4% m/m.

Consumer goods production was unchanged (+2.3% y/y) in July with output of consumer durables rising 0.2% m/m while output of nondurables was unchanged. Output of motor vehicles increased a sturdy 1.0% m/m but this was a sharp slowdown from the 7.6% m/m surge in June (which was a rebound from the 8.5% m/m collapse in May).

The production of construction supplies slid 0.1% m/m (+3.9% y/y) in July, their fourth monthly decline in the past seven months. Materials output edged up 0.1% m/m in July to be 6.0% above year-ago levels.

The drop in utilities output, dictated largely by the weather, was due entirely to a 0.9% m/m decline in electric power generation. Natural gas distribution rose 2.2% m/m. Output of energy slipped 0.2% m/m in July but the growth from a year earlier was a robust 8.3%.

In the special aggregate groupings, production in selected high-technology industries slowed to a still-solid 0.8% m/m increase from the 1.9% m/m jump in June. Non-energy production excluding high-tech advanced a modest 0.2% m/m in July following a 0.8% m/m gain in June. Factory sector production excluding both high-tech and autos improved 0.2% m/m, the same monthly rise as in June.

Capacity utilization was unchanged at 78.1% in July. This is well off the recession low of 66.7% in 2009 but still meaningfully below the pre-recession peak of 81.0% in 2007. Factory sector capacity utilization improved to 75.9% in July from 75.7% in June.

Industrial production and capacity data are included in Haver's USECON database, with additional detail in the IP database. The expectations figure is in the AS1REPNA database.

Industrial Production (SA, % Change) Jul Jun May Jul Y/Y 2017 2016 2015
Total Output 0.1 1.0 -0.8 4.2 1.6 -2.0 -1.0
Manufacturing 0.3 0.8 -0.9 2.9 1.2 -0.8 -0.6
    Consumer Goods 0.0 0.9 -2.5 2.3 0.0 0.7 1.5
    Business Equipment 0.8 2.2 -1.9 4.0 3.2 -5.3 -2.0
    Construction Supplies -0.1 -0.3 0.3 3.9 2.5 0.9 0.6
  Materials 0.1 1.0 0.2 6.0 2.0 -3.0 -1.5
Utilities -0.5 -0.7 -2.6 2.4 -1.3 -0.4 -0.8
Mining -0.3 2.9 0.8 12.9 6.4 -9.7 -3.4
Capacity Utilization (%) 78.1 78.1 77.5 76.1 76.1 75.4 77.3
 Manufacturing 75.9 75.7 75.2 74.6 74.8 74.6 75.8
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