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Economy in Brief

Industrial Output Gain Led By High Tech
by Tom Moeller January 17, 2006

Overall industrial output rose last month by 0.6% following an upwardly revised 0.8% increase during November. For the second month, the gain exceeded Consensus expectations which had been for a 0.5% rise. For all of 2005, output rose 3.1%. The gain was down from a 4.1% increase during 2004 but the two years together were the strongest in five years.

Factory sector production increased a scant 0.2% (4.1% y/y) following an upwardly revised 0.5% November increase. Again, the annual increase for all of 2005 in factory production of 3.8% was down versus a 5.0% increase during 2004.

Output of business equipment again was notably strong. A 2.7% (26.1% y/y) increase in high tech output was led by another 1.1% (11.7% y/y) increase in computer output, a 3.5% (30.8% y/y) spike in semiconductors and a 1.8% (25.2% y/y) surge in output of communications gear.

Excluding the high tech sector, factory output was unchanged (2.4% y/y) following an upwardly revised 0.3% November increase. For all 2005, output less the high tech sector rose 2.6% after a 3.8% rise during 2004.

Motor vehicle & parts output fell for the third straight month. The 2.8% (-2.4% y/y) decline slowed the annual increase in output to 2.8%, the worst for motor vehicles since 2002. Output of appliances, furniture & carpeting also fell for the third month but the 0.4% (+2.2% y/y) decline masked a 0.9% (-1.8% y/y) increase in furniture output.

Total capacity utilization rose to 80.7%, the highest level since late 2001. Capacity grew 1.6% y/y and for the year the 1.3% gain was the strongest since 2002. Factory sector utilization remained unchanged at 79.6% in December though the annual average during 2005 of 78.8% was the highest since 2000.

Excluding the high tech sector, the factory utilization rate slipped slightly in December to 80.1%. The annual average of 79.3% about matched the previous high during 2000. Capacity less the high tech sector grew a paltry 0.1% in December, about the monthly rate of the last year. While improved versus declines during 2003 & 2004, the 0.5% increase for all of last year compared unfavorably to a 4.5% increase during 1998.

Production & Capacity Dec Nov Y/Y 2005 2004 2003
Industrial Production 0.6% 0.8% 2.9% 3.1% 4.1% 0.6%
  Consumer Goods 0.2% -0.7% 1.3% 2.0% 2.1% 1.0%
  Business Equipment 0.5% 1.3% 10.2% 9.0% 9.3% 0.0%
Capacity Utilization 80.7% 80.3% 79.7% (12/05) 80.0% 78.6% 75.7%
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