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Economy in Brief

U.S. Industrial Output Fell Unexpectedly in May
by Tom Moeller June 17, 2008

Industrial production unexpectedly fell 0.2% last month following an unrevised 0.7% April drop. The latest decline was counter to the Consensus expectation for a 0.1% rise and it lowered the level of output 1.4% below its January peak.

The May decline in the total was due to a 1.8% (-0.6% y/y) drop in utility output. Factory output was unchanged (-0.3% y/y) but that followed the sharp, downwardly revised 0.9% decline during April. Output has now fallen 1.6% since its peak in July of 2007 and the three-month rate change was a negative 2.5% (AR).

Production in the high tech sector again was firm and rose 1.1% (25.0% y/y). Production of computers & office equipment rose a lessened 0.8% (16.7% y/y) because the three-month growth rate slowed to 8.1% (AR). Output of communications equipment rose 0.8% and three-month growth totaled 17.8%.

The trend in output outside the high-tech sector has been decidedly weak. Less high-tech, factory output fell 0.1% last month and three-month output growth was a negative 4.1% (AR). Output of motor vehicles & parts did rise 1.0% in May but three-month growth was a negative 36.2%. May output of furniture fell 0.4% and at an 8.8% rate during the last three months. Electrical equipment turned a bit of a corner with a 1.2% increase. During the last three months output here is up 9.9% (AR). Machinery output fell quite hard, again. A 1.5% May decline followed a 2.4% shortfall in April.

In the nondurables area output was unchanged and that was due to a 0.6% rise in chemical production. It's risen at a 3.2% rate during the last three months. Conversely, apparel output fell 0.9% and at a 14.2% rate during the last three months. Petroleum output also is down at a 5.7% since February and plastics are down 5.3%.

Capacity utilization fell again to 79.4% from 79.6% during April. Utilization in the factory sector fell to 77.5%, its lowest also since late-2004.

Inertial Taylor Rules: The Benefit of Signaling Future Policy from the Federal Reserve Bank of St. Louis can be found here.

INDUSTRIAL PRODUCTION (SA) May April Y/Y 2007 2006 2005
Total -0.2 -0.7 -0.1 1.7 2.2 3.3
   Manufacturing -0.8 0.0 -0.3 1.7 2.4 4.0
     Consumer Goods -0.2 -1.1 -1.6 1.7 0.3 2.8
     Business Equipment 0.0 -1.7 2.2 3.3 10.4 7.3
     Construction Supplies -0.2 -1.4 -5.6 -2.5 2.2 4.5
  Utilities 0.4 0.7 0.8 3.3 -0.6 2.1
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