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Economy in Brief

Industrial Production Up As Expected
by Tom Moeller March 17, 2006

Overall industrial output surged an expected 0.7% during February. The rise, however, was entirely due to a 7.9% rebound in utility output as winter temperatures returned to normal. Utility output had fallen 11.5% during the record warm January.

Factory sector production was unchanged following the upwardly revised 0.8% January increase and m/m declines in output were widespread amongst industries.

Motor vehicles & parts fell 0.8% (-2.0% y/y) after a 2.4% spurt in January. Excluding motor vehicles, factory output inched up 0.1% (4.8% y/y). That increase very much reflected a 1.2% (19.0% y/y) jump in output of computer & electronic components. Excluding both autos and high tech, factory output was unchanged (+3.6% y/y) during February.

Output of primary metals slipped 0.1% (+4.2% y/y) last month and the 0.5% (+4.6% y/y) decline in machinery output was the second in a row. Electrical equipment & appliance output dropped 1.7% (+7.3% y/y) but furniture & related products output rose 1.3% (-1.6% y/y).

The 0.2% decline (+1.5% y/y) in nondurables output reflected a 0.5% (+2.4% y/y) fall in apparel output and a 1.8% (-4.2% y/y) drop in petroleum & coal production.

Total capacity utilization rose to 81.2% although factory sector utilization reversed a bit of the prior month's jump and fell to 80.4% versus an average 78.9% during 2005.

Greenspan's Unconventional View of the Long-Run Inflation/Output Trade-off from the Federal Reserve Bank of St. Louis is available here.

Production & Capacity Feb Jan Y/Y 2005 2004 2003
Total Industrial Production 0.7% -0.3% 3.3% 3.2% 4.1% 0.6%
  Manufacturing 0.0% 0.8% 4.1% 3.9% 4.8% 0.5%
    Consumer Goods 0.8% -0.8% 1.8% 2.1% 2.1% 1.0%
    Business Equipment 0.1% 1.2% 10.4% 9.1% 9.3% 0.0%
Capacity Utilization 81.2% 80.8% 80.0% (2/05) 80.1% 78.6% 75.7%
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