Industrial Production Continues Weak Trend

By Jeff Harding

Industrial production remained flat again in June, up 0.2%, according to the Fed’s latest G17 report:

Industrial production in June rose moderately, but mainly due to a rebound in the utilities component. Manufacturing, however, was soft. Overall industrial production in June advanced a modest 0.2 percent, following a 0.1 percent dip in May (originally up 0.1 percent). The market consensus called for a 0.4 percent boost.

Manufacturing, however, was soft with no change after a 0.1 percent increase the month before (originally up 0.4 percent). The auto component has pulled down on production with three consecutive declines. The auto component fell 2.0 percent in June, following a 0.3 percent decrease the month before. Excluding motor vehicles, manufacturing rose 0.2 percent, following a 0.1 percent uptick in May.

Turning to other major sectors, utilities rebounded 0.9 percent after dropping 2.0 percent in May. Mining output grew 0.5 percent after a 0.7 percent increase.
On a year-on-year basis, overall industrial production improved to 3.4 percent from 3.3 percent in May.

Overall capacity utilization in June held steady at 76.7 percent. The June figure posted lower than analysts’ estimate for 76.9 percent.

The decline was reported as having to do with a decline in auto sales and production (-2.0%) and the gain was awarded to utility productions (+0.9%). According to one report, ”the average temperature was 70.7 degrees Fahrenheit (21.5 Celsius) last month, the 26th warmest June in 117 years.” Most economists are expecting gains in auto output as the supply chain disruptions from the Japan earthquake-tsunami are being resolved.

Here is how it looks:


If it weren’t for the trend line shown on the above industrial production chart, one could probably accept the conventional wisdom, but declining-flattening industrial production has been a year-long phenomenon.

Another trend to counter the underlying professional optimism is today’s NY (Empire) State manufacturing survey, here as compared to the Philadelphia survey:

It was a negative 3.76 this month, but better than the -7.79 for last month.

Another trend which I don’t think is a good trend for the economy is the decline in exports and imports, but it is especially the export trend we need to watch:

As we all know, foreign trade is good for everyone, importer and exporter. But while imports have been somewhat steady-to-flat, exports declined last month by $1 billion. Since the dollar has declined 8.5% against our major trading partners’ currencies, one would think that this export boom benefiting the multinationals would continue. If that is starting to decline, then that means our trading partners aren’t buying as much from us. As I posted the other day, “The World Is Turning … Down“, the data shows that our buyers’ economies are also slowing down.

Again, this bears watching, but the bottom line is that as we stagnate, so is the rest of the world. Perhaps there are underlying factors causing this, but who would believe that?

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