Friday, August 15, 2008

The US economy is still plugging away: Industrial production expanded in July

Today’s industrial production surpassed market expectations with +0.2% monthly growth. Industrial production is represented by three sectors: manufacturing, mining, and utilities. The manufacturing and mining sectors expanded 0.4% and 0.9%, while utilities contracted -1.9%.

A closer look

This is a positive number for two reasons. First, industrial production is used by the recession dating committee at the National Bureau of Economic Research (NBER). The overall economy is expanding (Q2 growth 1.9%) and industrial production is essentially unchanged over the last six months (-0.07% average). As the chart illustrates, recession-level annual industrial contraction can hit the -3% to -7% range; this month, production is down just -0.14% since last year. A sure-fire contraction in the industrial sector has not been established since the beginning of the year.

Second, the utility sector, rather than the manufacturing or mining sectors, is contracting. Record energy prices are causing households and firms to reduce their consumption of water, heat, and electricity. If you care about the environment, then here is another indication that people are cutting back on energy usage.

Notes on revisions

The March-June 2008 reports were all revised downward slightly.

Report Details

Industrial Production (July)
Expectations: +0.0% since June
Previous (June): +0.4% since June
Today’s release: +0.2% since June


Capacity Utilization
Expectations: 79.8%
Previous (June): 79.9%
Today’s release: 79.9%

Please leave comments. Best, Nontruths

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