The index of industrial production measures the physical output of the nation's factories, mines and utilities. The industrial sector accounts for less than one-fifth of the economy but for most of its cyclical variation. The capacity utilization rate reflects the usage of available resources among factories, utilities and mines. A high and rising operating rate may signal that resources are being utilized to their fullest capacity -- a warning sign of inflationary pressures. Why Investors Care
| Released on 7/17/07 For Jun 2007 | |||||||||||||||||||||||||
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Highlights
Industrial production in June rose sharply, jumping on the bandwagon of the improvement seen in a number of recent regional manufacturing surveys. Overall industrial production posted a 0.5 percent gain in June, following a 0.1 percent dip in May. The market consensus had forecast a 0.4 percent boost in overall industrial production for June. The manufacturing component was up a robust 0.6 percent, following no change in May. For June, utilities output rebounded 0.3 percent while mining output jumped 0.5 percent.
Overall capacity utilization in rose to 81.7 percent from 81.4 percent in May. June's number came in above the consensus forecast for 81.5 percent capacity utilization. The capacity utilization rate for manufacturing jumped to 80.3 percent in June from 79.9 percent in May.
Within manufacturing, durables output jumped 0.8 percent in June, following a 0.1 percent increase the month before. Nondurables rose a moderate 0.3 percent, following no change in May. Industries showing greatest strength in June were motor vehicles, primary metals, furniture, and nonmetallic mineral products. By market categories, consumer goods output advanced 0.7 percent in the latest month while business equipment was flat. Nonindustrial supplies rose 0.4 percent in June while materials output increased 0.6 percent in June.
Today's report confirms the recent jump in a number of manufacturing surveys and indicates that second quarter growth indeed has rebounded from a weak first quarter. We will likely hear a little on this from Fed Chairman Bernanke tomorrow in testimony before Congress. Today's numbers will likely push interest rates up but equities will possible still rise given favorable company earnings reports out this morning and the fact that the Fed is on hold already factored in for the most part.
Year-on-year rates for industrial production continue to slip. For the overall industrial production index this rate declined to up 1.4 percent in June from up 1.7 percent in May while for manufacturing the year-on-year rate declined to up 1.6 percent from up 1.9 percent the month before.
The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.
Industrial production was unchanged in May, following a 0.4 percent boost the prior month. The manufacturing component rose only 0.1 percent in June with weakness in consumer goods while business equipment was flat. Capacity utilization slipped 2 tenths in June to 81.3 percent. More recently, aggregate production hours, as seen in the employment situation report, strengthened to a 0.3 percent boost in June from a 0.1 percent rise in May - suggesting that manufacturing will improve for the month.
Industrial production Consensus Forecast for June: +0.4 percent Range: 0.0 to +0.6 percent
Capacity utilization Consensus Forecast for June 07: 81.5 percent Range: 81.3 to 81.8 percent
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The industrial sector accounts for less than 20 percent of GDP. Yet, it creates much of the cyclical variability in the economy. |
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The capacity utilization rate reflects the limits to operating the nation's factories, mines and utilities. In the past, supply bottlenecks created inflationary pressures as the utilization rate hit 84 to 85 percent. |
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