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Economy in Brief

U.S. Factory Output Off As Recession Worsens
by Tom Moeller December 15, 2008

Industrial production fell 0.7% during November after a revised 1.5% rise (initially reported at 1.3%) during October. That earlier increase was lifted by recoveries from Hurricanes Gustav & Ike and an end to the strike at Boeing. Last month's decline about matched Consensus expectations.The -5.5% y/y change in industrial output was nearly sharpest drop since the recession of 1982.

The weakness in factory output was worse than the total IP figure suggested. In fact a 1.4% decline in manufacturing production was double that of the total and nearly the worst since 1982. Output of consumer goods fell 0.7% and that pulled the y/y change to -3.8% as production of motor vehicles & parts declined 2.8% (-21.4% y/y). Outside of the auto sector the news was quite bad and production fell 1.4% for a 6.3% y/y decline.

Industrial production in the high-tech sector is in steep recession. Output fell 1.9% during November, about as it did during the prior three months. The figure was pulled lower by a 1.1% (-2.9% y/y) shortfall in the output of computers & peripherals which was the sixth consecutive monthly drop.

Output declines extend well beyond autos and high-tech. Less those two sectors, production fell 1.4% last month for a y/y decline of 6.9%. Indeed, the industry detail further reflected widespread recession in the factory sector. Output of furniture & related products fell 2.9% last month for an 18.8% y/y decline, the largest y/y drop since the recession of 1975. Machinery production continued to reflect recession. The 2.3% (-8.8% y/y) was the third such consecutive drop. Output of electrical equipment production again joined the recession show and fell 2.2% (-5.0% y/y). Apparel output in the "recession-resistant" nondurables sector slipped 0.3% after much heftier declines during the prior two months but it is down just 4.0% y/y. Production of chemicals reversed much of an October increase and fell 3.6% (-8.7% y/y).

Utility output surged 1.6% (-0.3% y/y) with colder temperatures.

Capacity utilization fell to 75.4% after its brief October recovery. It was close to its lowest level since 2003. Utilization in the factory sector of 72.2% also was near the lowest since 2003. Capacity in the factory sector increased a firm 1.7% y/y).

The Financial Tsunami and the Federal Reserve is today's speech delivered by Philadelphia Fed President Charles I. Plosser and it can be found here.

INDUSTRIAL PRODUCTION (SA, %) November October Y/Y 2007 2006 2005
Total Output -0.7 1.5 -5.5 1.7 2.2 3.3
   Manufacturing -1.4 0.7 -7.3 1.8 2.8 4.2
     Consumer Goods -0.7 1.6 -3.8 1.7 0.3 2.8
     Business Equipment 3.3 -2.6 -7.4 3.3 10.4 7.3
     Construction Supplies -3.3 -1.4 -9.7 -2.5 2.2 4.5
  Utilities 1.6 0.7 -0.3 3.3 -0.6 2.1
Capacity Utilization 75.4 76.0 81.1 (Nov.'07) 81.0 80.9 80.2
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