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 7/16/08 For Jun 2008 | |||||||||||||||||||||||||
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Highlights
Industrial production in June topped expectations, primarily on a rebound in utilities, although manufacturing did post a modest rebound. Overall industrial production rebounded 0.5 percent in June, following a 0.2 percent decline in May. The June gain was above the market forecast for no change. The manufacturing component made a 0.2 percent comeback, after slipping 0.1 percent in May. Utilities output increased 2.1 percent in June while mining output rose 1.1 percent.
Although the manufacturing component did rise in June, strength was led by a monthly 5.4 percent jump in motor vehicle output which followed a 0.6 percent rise in May. Excluding motor vehicles, manufacturing output slipped 0.1 percent - the same as in the prior month. Other components were mixed. Moderate gains were seen in wood products, primary metal, computer & electronic products, apparel & leather, petroleum & coal, and plastic & rubber.
On a year-on-year basis, industrial production in June improved marginally to up 0.3 percent from up 0.2 percent in May.
Overall capacity utilization in June rose to 79.9 percent from 79.6 percent in May and compared to the market forecast for 79.3 percent for the latest month.
Today's report indicates that manufacturing is slightly better than recent regional surveys have suggested. Keeping in mind that overall production was boosted by utilities, manufacturing is still very sluggish, with the recent trend still flat. After all, June's modest rebound followed two negative months.
The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.
Industrial production in May unexpectedly fell but the decline was primarily due to a drop in utilities output. But the bottom line still is that the manufacturing sector is flat. Overall industrial production fell 0.2 percent in May, following a 0.7 percent decline in April. However, the manufacturing component was not was weak, coming in flat after falling 0.9 percent in April. Utilities output dropped 1.8 percent in the latest month while mining output edged up 0.1 percent. But recent data suggest that at least the manufacturing component will fall in June as most regional manufacturing surveys have been in the negative range and the June aggregate manufacturing hours index from the employment report slipped 0.2 percent. On a final note, overall capacity utilization in May slipped to 79.4 percent from 79.6 percent the prior month.
Industrial production Consensus Forecast for June: 0.0 percent
Range: -0.4 to +0.5 percent
Capacity utilization Consensus Forecast for June 08: 79.3 percent
Range: 79.0 to 79.7 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. |
![[Chart]](chart_1.gif)
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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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