Tuesday, July 16, 2013

Industrial Production In Line: Hardly Bad Enough To Send S&P Above 1700

by Tyler Durden

Those hoping that the Stalingrad & Propaganda 471 would soar above 1700 today on some abysmal Industrial Production will have to taper their hopes, as the number printed right on top of expectations, or at 0.3%, up from last month's 0.0%. This was driven by a better blend of Manufacturing (+0.3%), Mining (+0.8%), both the highest since February, and Utilities which dipped -0.1%, but far better than the prior two months' -1.6% and -2.8% declines on "cooler|warmer" weather. Parallel to the IP data the Capacity Utilization printed at 77.8, up from an upward revised 77.7 last month, and a fraction above expectations, leading to the first "beat" in the series since 2010 even though the headline number was 0.1 above the lowest print of 2013 to date. Alas, with the Old Normal average in the 80+ range, there is much room to go before the legacy manufacturing slack is absorbed. One thing is certain: QE is not helping.

The visual breakdown:

Some more on Cap Utilization:

Capacity utilization rates in June for industries grouped by stage of process were as follows: At the crude stage, utilization fell 0.1 percentage point to 86.2 percent, a rate 0.1 percentage point below its long-run average; at the primary and semifinished stages, utilization inched up 0.1 percentage point to 76.0 percent, a rate 5.0 percentage points below its long-run average; and at the finished stage, utilization rose 0.2 percentage point to 76.1 percent, a rate 1.0 percentage point lower than its long-run average.

The estimates for industrial capacity in 2013 were revised for this release. The revisions reflect updated measures of physical capacity from various government and trade sources as well as updated estimates of industry capital spending. Capacity for the industrial sector, measured from the fourth quarter of 2012 to the fourth quarter of 2013, is now expected to increase 1.8 percent, a rate that is 0.1 percentage point slower than previously estimated. Manufacturing capacity is expected to rise 1.6 percent in 2013, a pace 0.2 percentage point less than in previous estimates. Relative to the previous estimates, faster gains in the high-technology and motor vehicles industries have been more than offset by slower gains elsewhere in manufacturing. The increase in mining capacity for 2013 has been revised upward by 0.5 percentage point to 4.4 percent, while the change in capacity for utilities, at 0.9 percent, is 0.2 percentage point faster than previously estimated.

From the report, breaking down IP by Industry Group:

Manufacturing output increased 0.3 percent in June after having risen 0.2 percent in May. The index for manufacturing decreased at an annual rate of 0.2 percent in the second quarter, after having advanced 5.1 percent in the first quarter. The factory operating rate inched up to 76.1 percent in June, a rate 2.6 percentage points below its long-run average.

The output of durable goods moved up 0.5 percent in June; for the second quarter, the index increased at an annual rate of 1.5 percent after having improved 6.5 percent in the first quarter. Among its major components, the largest gains in June were for machinery, for miscellaneous manufacturing, and for motor vehicles and parts, which all posted gains of more than 1 percent. The indexes for several other categories also moved up, but those for wood products, primary metals, aerospace and miscellaneous transportation equipment, and furniture and related products all decreased. Capacity utilization for durable goods manufacturing moved up 0.2 percentage point to 76.2 percent, a rate 0.8 percentage point below its long-run average.

The production of nondurable goods was unchanged in June after having edged up 0.1 percent in May. The index fell at an annual rate of 1.5 percent in the second quarter after having advanced 4.5 percent in the first quarter. Among nondurables, the index for food, beverage, and tobacco products increased 0.8 percent and the output of textile and product mills stepped up 1.4 percent in June. These gains were offset by losses of 0.9 percent both in printing and support and in paper as well as a drop of 1.1 percent in petroleum and coal products. The other major nondurables industries posted only small changes, with the indexes for apparel and leather and for plastics and rubber products up slightly and the index for chemicals down a little. Capacity utilization for nondurables remained at 77.5 percent for the third consecutive month, a level 3.2 percentage points below its long-run average.

Production for non-NAICS manufacturing industries (publishing and logging) increased 0.7 percent in June, the first gain realized in 2013; the index fell at an annual rate of 6.4 percent last quarter, a smaller decrease than in the first quarter.

In June, the production at mines advanced 0.8 percent, double its rate of increase in May. For the second quarter, mining output rose at an annual rate of 4.9 percent after having fallen 0.7 percent in the first quarter. In June, the capacity utilization rate for mining increased 0.3 percentage point to 87.9 percent, a rate 0.6 percentage point above its long-run average. The production index for electric utilities edged up 0.1 percent, while the index for natural gas utilities fell 1.0 percent. The operating rate for utilities inched down 0.1 percentage point to 77.6 percent, a rate 8.6 percentage points below its long-run average.

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