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Economy in Brief

U.S. Industrial Output's Recovery Masked By Lower Utility Usage; Factory Output Firm
by Tom Moeller

The coming of Spring caused utility output to slump 6.4% last month, the largest monthly decline since 2006. That held the increase in March industrial production to 0.1%. Like the weather, however, factory output warmed up and recovered 0.9% after an upwardly revised 0.2% February gain. The latest overall increase fell short of Consensus expectations for a 0.7% rise. Nevertheless, the year-to-year gain in overall output soared to 4.0%, the strongest since June 2005. Since the low last June, overall output has risen 6.1% compared to the 9.7% decline during all of last year. Factory output is up 6.5% from its low.

Gains in output were a broad-based 55.1% of industries. A 2.1% (26.7% y/y) increase in motor vehicle & parts production recovered half of the February decline. Elsewhere, computer (11.3% y/y), electrical equipment (1.6% y/y) and machinery (2.3% y/y) output were firm. Output also recovered last month in the furniture (-8.1% y/y) and apparel (3.0% y/y) industries.Though down slightly last month, chemical output is up a firm 6.9% y/y.

The technology area has been quite strong. Output here is up 14.2% y/y led by a 25.4% rise in semiconductor output. Excluding the tech area factory output rose a lesser 4.3% year-to-year. The huge gain in motor vehicles also helped overall output growth. Less motor vehicles and technology factory sector output rose 3.1% during the last twelve months.

Capacity utilization rose further to 73.2%, its highest level since November 2008. In the factory sector alone utilization rose to 70.5% from the 2009 low of 65.2%. Utilization in the primary metals area has risen sharply to 64.4% from a 2009 average of 51.3%. There's also been rise in utilization in the motor vehicle sector to 54.4% from a low of 36.8% in June. Utilization was 77.0% during all of 2005. In the electrical equipment industry utilization rose to 73.6% from the low of 69.3% last year. The rise in overall industrial utilization was accompanied by another 0.1% m/m decline in capacity which was down a record 1.3% y/y.

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

Industrial Production (SA,%) March February January Y/Y 2009 2008 2007
Total Output 0.1 0.3 0.9 4.0 -9.7 -2.2 1.5
  Manufacturing 0.9 0.2 0.9 4.6 -11.3 -3.2 1.4
    Consumer Goods -0.2 0.0 0.9 3.4 -5.2 -2.6 0.9
    Business Equipment 1.4 0.6 1.5 3.6 -12.4 -1.1 2.7
    Construction Supplies 2.2 -0.2 1.6 -0.2 -17.8 -6.3 -2.0
    Materials 0.0 0.6 0.9 5.6 -10.9 -1.9 2.0
  Utilities -6.4 0.0 0.4 -0.8 -2.5 0.3 3.4
Capacity Utilization (%) 73.2 73.0 72.7 69.5(Mar. '09) 70.1 77.5 80.6
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