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Economy in Brief

U.S. Factory Production Improves Sharply With Higher Auto Output
by Tom Moeller August 14, 2009

A consistent indicator of turning points in the U.S. economy has been industrial output. And last month it signaled growth. Industrial output, which includes mining and utilities, rose a greater-than-expected 0.5% during July after an unrevised 0.4% June decline. More important for recession timing, perhaps, was that factory output increased for the first month since December of 2006. This call still is not a sure thing, however, because of the industry composition of the gain.

Output of consumer goods overall jumped 0.7% during July led by a 17.3% surge in auto production (-22.2% y/y). But that's only a partial indication of a change from the widespread downward momentum in industry output. Furniture & appliance output slipped 0.1% (-22.3% y/y) as consumers continued to defer purchases of large durable goods. Consumer nondurables output fell 0.9% with a decline in chemical products products production but output of business equipment rose 0.5% (-17.3% y/y. The output of construction supplies slipped 0.1% (-20.9% y/y).

In the the high-tech sector the rate of decline in output also has slowed. Industrial production of high tech equipment slipped 0.1% last month. Less high tech, manufacturing industrial production jumped 1.0% last month and the annual rate of change eased to -9.8% over the last seven months. Outside of the auto and high-tech sectors together, output rose 0.1% for the first increase since last October.

Excess capacity diminshed slightly with the rise in production. Capacity utilization rose from its record low to 68.5%. The series dates back to 1966. Utilization in the factory sector also improved to 65.4%, still down from a peak near 80% back in 2007.

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

INDUSTRIAL PRODUCTION (SA, %) July June Y/Y 2008 2007 2006
Total Output 0.5 -0.4 -13.0 -2.2 1.5 2.3
   Manufacturing 1.0 -0.5 -14.4 -3.2 1.4 2.5
     Consumer Goods 0.7 -0.6 -7.2 -2.6 0.9 0.4
     Business Equipment 0.5 -0.7 -17.3 -1.1 2.7 9.4
     Construction Supplies -0.1 -0.4 -20.9 -6.3 -2.0 2.3
  Utilities -2.5 0.9 -4.9 0.3 3.4 -0.6
Capacity Utilization 68.5 68.1 78.6 (July '08) 77.6 80.6 80.9
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