What's Your Favorite Energy Play? - Real Time Insight

By John Blank,

Shutterstock photo

We got the latest Fed Industrial production indexes.

Good news!  Industrial production climbed +0.4% in July.  That's a sixth consecutive monthly gain.

At 104.4% of its 2007 average, total industrial production in July was +5.0% above its year-earlier level.  That's a decent annual rate of advance.  Big U.S. companies can grow top lines annually at a similar rate.

Capacity utilization for total industry edged up 0.1% to 79.2% in July.  That ratio is 1.7 points above its level of a year earlier and 0.9 points below its long-run (1972-2013) average. 

Staying below that key 80% level overall should keep any inflation hawks at bay.

The Cyclical Story

A boom in cyclical auto spending drove the biggest increase in July monthly numbers. Looks like consumers hit auto showrooms hard this summer.  Manufacturing output advanced +1.0% in July, its largest increase since February. Production of motor vehicles and parts jumped +10.1%.  The rest of the manufacturing sector gained +0.4%.

Output of utilities dropped -3.4%.  Weather was milder than usual for July. That reduced air conditioning demand.

The Structural Story

The biggest structural story across 2014 remains oil and gas.  In July, production at mines moved up +0.3%, its ninth consecutive monthly increase.  It's all oil & gas.

In 2014, the U.S. mining sub-index has made a big move…

Mining Index in 2014
Jan - 122.9
Feb - 123.0
March - 125.0
April - 127.7
May - 128.4
June - 130.1
July - 130.5

Six-month mining change 130.5 - 122.9 = 7.6%

Mining, on the back of oil & gas fracking, has made a +8.6% annual move.

Oil & gas is the leading entire structural growth story.

My RTI Question: What's Your Favorite U.S. Energy Play?

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing Stocks
Referenced Stocks: SPY , QQQ , DIA

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