U.S. Factory Output Rose 0.1% vs 0.3% Expected In July

by Ike Obudulu Posted on August 15th, 2018

Washington D.C., USA: Industrial production edged up 0.1 percent in July after rising at an average pace of 0.5 percent over the previous five months, Federal Reserve data showed Wednesday.

Manufacturing production increased 0.3 percent, the output of utilities moved down 0.5 percent, and, after posting five consecutive months of growth, the index for mining declined 0.3 percent. At 108.0 percent of its 2012 average, total industrial production was 4.2 percent higher in July than it was a year earlier. Capacity utilization for the industrial sector was unchanged in July at 78.1 percent, a rate that is 1.7 percentage points below its long-run (1972–2017) average.

Market Groups

The indexes for most of the major market groups were little changed in July. The index for consumer goods was unchanged, with a small gain for durables offset by a small loss for consumer energy products. The index for business equipment rose 0.8 percent, with large gains in transit equipment and information processing equipment. The indexes for construction supplies, business supplies, defense and space equipment, and materials were little changed. Within materials, the output of durables rose modestly, the output of nondurables edged down, and the output of energy materials was flat following four consecutive monthly gains above 1.0 percent.

Industry Groups

Manufacturing output increased 0.3 percent in July and was 2.8 percent higher than its year-earlier level. The index for durables rose 0.4 percent, the index for nondurables moved up 0.2 percent, and the index for other manufacturing (publishing and logging) fell 0.5 percent. Within durables, most major industry groups posted increases; the largest gains, of around 1 percent each, were for motor vehicles and parts and for computer and electronic products. Within nondurables, increases in the indexes for apparel and leather, for petroleum and coal products, for chemicals, and for plastics and rubber products were partly offset by decreases elsewhere.

Mining output declined in July, as a further increase in oil and gas extraction was slightly outweighed by decreases in the indexes for other mining and for mining support activities. Despite the pullback in July, mining output was nearly 13 percent above its year-earlier level. The index for utilities fell 0.5 percent in July for its third consecutive monthly decrease.

Capacity utilization for manufacturing increased 0.2 percentage point in July to 75.9 percent, a rate that is 2.4 percentage points below its long-run average. The operating rates for durables and nondurables moved up 0.2 percentage point and 0.1 percentage point, respectively. The utilization rate for mining fell to 92.0 percent, which is 5.0 percentage points higher than its long-run average. The rate for utilities fell 0.5 percentage point to 77.5 percent, nearly 8 percentage points below its long-run average.

Officials at the Fed tend to look at capacity use measures for signals of how much “slack” remains in the economy how far growth has room to run before it becomes inflationary.

The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up 75 percent of total industrial production, accounts for about 12 percent of the U.S. economy

Industrial production, also called, factory output measures change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities;

It’s a leading indicator of economic health – production reacts quickly to ups and downs in the business cycle and is correlated with consumer conditions such as employment levels and earnings.

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