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Economy in Brief

U.S. Factory Production Decline Resumes, Matching 1946 Yr/Yr Drop
by Tom Moeller June 16, 2009

The Federal Reserve reported that the earlier letup in the factory sector recession was short-lived. Output, which includes mining and utilities, declined a greater-than-expected 1.1% last month following a 0.7% April drop that was larger than reported initially. During the last three months, output is off at a 13.7% rate, and off 13.5% in the last twelve, the sharpest drop y/y since 1946.

Output of consumer goods overall fell 0.9% (-7.2% y/y) and the declines were broad-based. Production of autos fell another 5.3%, though the year-to-year decline eased to -29.0%. Furniture, appliance & carpeting output continued to reflect the weakness in the housing market and posted a 1.1% drop (-20.8% y/y) while apparel output slipped 0.3% (-10.6% y/y). In the capital goods sector, there's been no letup in output's rate of decline. Production of business equipment fell 1.4% last month and the three-month rate of change stands at -21.5% (AR), nearly the worst of this downturn. Finally, the downturn in the housing market continued to exact its toll on the output off construction supplies. It fell 1.0% and at a 19.2 rate during the last three months.

The high-tech sector continued to suffer. Industrial production here fell 1.9% last month but at a reduced 5.5% rate during the last three. Less high tech, overall industrial production fell 0.8% last month and the annual rate of change eased to -13.6%.

Excess capacity grew even further last month. Capacity utilization fell to 68.3%, a record low for the series which dates to 1966. Utilization in the factory sector dropped even harder to 65.0% from a peak near 80% back in 2007. The latest, again, was the lowest since WWII.

The industrial production data are available in Haver's USECON database.

INDUSTRIAL PRODUCTION (SA, %) May April Y/Y 2008 2007 2006
Total Output -1.1 -0.7 -13.5 -2.2 1.5 2.3
   Manufacturing -1.0 -0.6 -15.3 -3.2 1.4 2.5
     Consumer Goods -0.9 -0.2 -7.2 -2.6 0.9 0.4
     Business Equipment -1.4 -1.9 -16.5 -1.1 2.7 9.4
     Construction Supplies -1.0 -1.6 -21.5 -6.3 -2.0 2.3
  Utilities -1.4 0.7 -3.4 0.3 3.4 -0.6
Capacity Utilization 68.3 69.0 78.9 (May '08) 77.6 80.6 80.9
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