U.S. Industrial Production Unexpectedly Drops for the Second Straight Month in June
Summary
- IP -0.5% in June; May revised down but April revised up.
- Mfg. IP declines 0.3%, w/ durable goods down 0.1% and nondurable goods down 0.6%.
- Utilities output decreases for the fifth time in six months.
- Mining activity and consumer goods output down for the second successive month.
- Capacity utilization falls 0.5%-pt. to a six-month-low 78.9%; mfg. capacity utilization falls 0.3%-pt. to a three-month-low 78.0%.
Total industrial production fell 0.5% m/m (-0.4% y/y) in June after a 0.5% decline in May (-0.2% previously) and a 0.6% rise in April (+0.5% initially), according to the Federal Reserve Board. The June m/m fall compared to expectations for no change in the Action Economics Forecast Survey. The June IP index at 102.2 was 1.3% below a September high. IP rose 0.2% q/q in Q2 2023 after a 0.1% q/q easing in Q1 2023, rising at a 0.7% annualized rate vs. a -0.3% Q1 annualized rate.
By industry groups, manufacturing production fell 0.3% (-0.3% y/y) in June, the third m/m fall in four months, after a downwardly revised 0.2% decline in May (+0.1% previously). Durable goods production slipped 0.1% (+0.8% y/y), the first m/m easing in three months, after a 0.1% May uptick, led by output drops of 3.0% (+9.5% y/y) in motor vehicles & parts, 1.2% (0.0% y/y) in nonmetallic mineral products, and 0.8% (-2.8% y/y) in machinery. Other durable goods categories, however, rose m/m in June, reflecting gains of 1.9% (-5.6% y/y) in wood products, 1.8% (0.4% y/y) in miscellaneous durables goods, 1.6% (2.5% y/y) in aerospace & miscellaneous transportation equipment, 1.3% (0.2% y/y) in computer & electronic products, 0.7% (-0.7% y/y) in primary metals, and 0.6% (-7.6% y/y) in furniture & related products.
Nondurable goods production decreased 0.6% (-1.4% y/y) in June, the third m/m drop in four months, after a 0.3% decline in May, reflecting output falls of 2.9% (-8.6% y/y) in textiles & products, 2.5% (-6.6% y/y) in printing & related support activities, 1.7% (-1.4% y/y) in apparel & leather goods, 1.6% (+1.8% y/y) in petroleum & coal products, 1.3% (-2.3% y/y) in food, beverages & tobacco, and 0.8% (-5.0% y/y) in plastics & rubber products. Production in chemicals was the only group with a monthly gain in June, rebounding 0.8% (1.8% y/y) after a 0.6% May decline, while production in paper was virtually unchanged (-8.6% y/y).
Utilities output slid 2.6% (-6.2% y/y) in June, the fifth m/m slide in six months, after a 1.5% drop in May (-1.8% previously). Mining activity declined 0.2% (+2.8% y/y) following a 1.4% May decrease and two consecutive m/m increases.
By market groups, consumer goods output fell 1.3% (-0.7% y/y) in June after a 0.5% decline in May, reflecting drops of 2.7% (-0.5% y/y) in durable consumer goods and 0.9% (-0.7% y/y) in nondurable consumer goods. Business equipment output dipped 0.04% (-0.2% y/y) after a 0.4% May decline. Materials production fell 0.4% (+0.03% y/y), the second successive m/m fall, following four straight m/m increases. To the upside, construction supplies production grew 0.3% (-1.1% y/y), the third consecutive m/m gain.
In special classifications, factory output of selected high-tech industries rose 1.2% (3.4% y/y) in June, the fifth straight m/m advance, on top of a 0.2% increase in May. By contrast, manufacturing production excluding selected high-tech industries fell 0.4% (-0.4% y/y) and manufacturing production excluding both selected high-tech and motor vehicles & parts dipped 0.1% (-1.2% y/y), the third m/m decline in four months.
Capacity utilization fell to 78.9% in June, the lowest level since December, from 79.4% in May; 0.8 percentage point below its long-run (1972–2022) average. A 79.5% rate had been expected. Manufacturing capacity utilization declined to 78.0% in June, the lowest reading since March, from 78.3% in May.
Industrial production and capacity are located in Haver's USECON database. Additional detail on production and capacity utilization can be found in the IP database. The expectations figures come from the AS1REPNA database.
Winnie Tapasanun
AuthorMore in Author Profile »Winnie Tapasanun has been working for Haver Analytics since 2013. She has 20+ years of working in the financial services industry. As Vice President and Economic Analyst at Globicus International, Inc., a New York-based company specializing in macroeconomics and financial markets, Winnie oversaw the company’s business operations, managed financial and economic data, and wrote daily reports on macroeconomics and financial markets. Prior to working at Globicus, she was Investment Promotion Officer at the New York Office of the Thailand Board of Investment (BOI) where she wrote monthly reports on the U.S. economic outlook, wrote reports on the outlook of key U.S. industries, and assisted investors on doing business and investment in Thailand. Prior to joining the BOI, she was Adjunct Professor teaching International Political Economy/International Relations at the City College of New York. Prior to her teaching experience at the CCNY, Winnie successfully completed internships at the United Nations. Winnie holds an MA Degree from Long Island University, New York. She also did graduate studies at Columbia University in the City of New York and doctoral requirements at the Graduate Center of the City University of New York. Her areas of specialization are international political economy, macroeconomics, financial markets, political economy, international relations, and business development/business strategy. Her regional specialization includes, but not limited to, Southeast Asia and East Asia. Winnie is bilingual in English and Thai with competency in French. She loves to travel (~30 countries) to better understand each country’s unique economy, fascinating culture and people as well as the global economy as a whole.
