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Economy in Brief

Industrial Production Rose Further
by Tom Moeller April 17, 2006

During March, overall industrial output rose another 0.6% and added to a downwardly revised 0.5% February increase. Consensus expectations had been for a 0.5% gain.

Factory sector output rose 0.5% after a revised 0.2% February decline that was initially reported as no change.

Motor vehicles & parts production rebounded 1.5% (2.7% y/y) after a 1.1% February drop. Excluding motor vehicles, factory output increased 0.4% (5.0% y/y) but a slight increase initially reported for February was revised to a slight 0.1% decline.

Output of computers, communication equipment and semiconductors increased 2.7% (23.2% y/y) as output of communications equipment rose 2.2% (29.6% y/y) and semiconductor production surged 3.5% (24.0% y/y). Factory output excluding both autos & high tech rose 0.3% (3.7% y/y) after the revised 0.1% February decline. For 1Q, this measure of output rose 5.2% (AR).

Output of primary metals was unchanged (3.4% y/y) but machinery output rebounded 1.4% (5.2%) following two consecutive months of sharp decline. Electrical equipment & appliance output likewise rebound from a February drop with a 0.7% increase (9.4% y/y). Output of furniture & related products rose but the 0.4% (-1.2% y/y) increase followed a 0.6% rise during February that was half the gain initially reported.

Nondurables output recovered 0.3% (1.8% y/y) following a 0.3% February drop. Apparel output surged 2.1% (6.3% y/y).

Total capacity utilization rose to 81.3% but utilization during February was revised lower. Factory sector utilization rose to 80.4% from 80.2% the prior month. During the last twenty years there has been a 36% correlation between the level of factory sector utilization and the y/y change in "core" producer prices. There also has been a 37% correlation with the change in core consumer prices.

Industrial capacity grew 0.1% (1.9% y/y) and the annual rate of growth is up from 1.3% last year and 0.3% during 2004. Factor sector capacity grew 0.2% (2.4% y/y) compared to 1.6% growth last year and 0.2% growth during 2004. Much of that growth has been in the high tech sector. Excluding high tech, factory sector capacity is up just 0.8% versus a 0.5% gain last year and a 0.2% decline the year prior.

Productivity Growth: Causes and Consequences from the Federal Reserve Bank of San Francisco is available here.

A Leaner, More Skilled U.S. Manufacturing Workforce from the Federal Reserve Bank of New York can be found here.

Production & Capacity Mar Feb Y/Y 2005 2004 2003
Total Industrial Production 0.6% 0.5% 3.6% 3.2% 4.1% 0.6%
  Manufacturing 0.5% -0.2% 4.8% 3.9% 4.8% 0.5%
    Consumer Goods 0.4% 0.7% 1.8% 2.1% 2.1% 1.0%
    Business Equipment 0.8% 0.2% 10.8% 9.1% 9.3% 0.0%
Capacity Utilization 81.3% 81.0% 79.9% (3/05) 80.1% 78.6% 75.7%
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