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Economy in Brief

Industrial Production Jumped
by Tom Moeller May 16, 2006

Total industrial output jumped 0.8% last month following two months of 0.5% gain. Consensus expectations had been for another 0.5% increase.

Factory sector output surged 0.8% (5.5% y/y) after an unrevised 0.5% March increase. That increase matched a 0.8% January spike and lifted the y/y gain in factory output to its highest since in over a year.

A 1.7% (12.4% y/y) rise in business equipment output provided umph to last month's gain in output as output of computers, communication equipment and semiconductors jumped 2.4% (21.7% y/y). Factory output excluding high tech, however, also was strong and rose 0.7% (4.6% y/y).

Output of nondurable consumer goods rose 0.4% (2.1% y/y) as appliance & furniture output rose 0.2% (4.0% y/y). Automotive products' production fell 1.1% (+4.2% y/y). Excluding motor vehicles and high tech factory output increased 0.9% (4.7% y/y).

Output of primary metals jumped 1.2% (6.7% y/y) following two months of decline and fabricated metals output rose 0.5% (6.1% y/y).

Total capacity utilization surged to 81.9%, the highest level since July of 2000. Factory sector utilization rose to 80.5%, also its highest level since 2000. 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% (2.3% 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 1.0% y/y.

The 1990s Acceleration in Labor Productivity: Causes and Measurement from the Federal Reserve Bank of St. Louis can be found here.

Production & Capacity April Mar Y/Y 2005 2004 2003
Total Industrial Production 0.8% 0.6% 4.8% 3.2% 4.1% 0.6%
  Manufacturing 0.8% 0.5% 5.5% 3.9% 4.8% 0.5%
    Consumer Goods 0.2% 0.8% 2.7% 2.1% 2.1% 1.0%
    Business Equipment 1.7% 0.7% 12.4% 9.1% 9.3% 0.0%
Capacity Utilization 81.9% 81.4% 79.7% (4/05) 80.1% 78.6% 75.7%
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