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Economy in Brief

Weak Manufacturing Drives U.S. Industrial Production Lower
by Gerald D. Cohen  May 15, 2019

Industrial production fell a greater-than-expected 0.5% (+0.9% year-on-year) during April following an upwardly-revised 0.2% gain in March (was -0.1%). The Action Economics Survey forecast an unchanged reading for April.

Manufacturing activity decreased 0.5% (-0.2% y/y) during April, while March was unchanged (unrevised). Utilities output dropped 3.5% (-4.7% y/y) as the number of heating days went from above-normal to below-normal. Meanwhile mining activity increased 1.6% (10.4% y/y) following three months of decline.

The decrease in manufacturing production was driven by a 0.9% drop in durables (+0.4% y/y), with motor vehicles and machinery both down 2.6% in April (-4.4% y/y and -0.7% y/y respectively). Aerospace output declined 0.8% (+4.4% y/y) while computers contracted 0.5% (+2.5% y/y). Nondurable output edged down 0.1% (-0.4% y/y) as petroleum & coal plummeted were unchanged (-1.1% y/y), chemicals ticked up 0.1% (1.9% y/y), and food decreased 0.2% (-1.2% y/y).

By market group, consumer goods output fell 1.2% in April (-2.5% y/y), business equipment dropped 2.1% (+0.1% y/y), and construction supplies declined 0.7% (+0.4% y/y). Materials gained 0.2% (3.2% y/y) as energy materials grew 0.7% (7.5% y/y).

In the special aggregate groupings, production of high technology products increased 0.6% (3.2% y/y). Semiconductor & electronic components gained 0.5% (1.6% y/y) and communications equipment edged up 0.1% (10.3% y/y). Output in computer & office equipment jumped 1.3% (-0.3% y/y), though it stands just slightly above 2008 levels. Factory sector production excluding the motor vehicle and high tech sectors declined 0.4% (+0.1% y/y) and is still 11% below its 2007 peak.

Capacity utilization dropped to 77.9% in April from 78.5%, well below the 78.7% expectations from Action Economics Survey. Factory sector use declined to 75.7% down 1.6 percentage points from December. Mining increased to 91.4%, though is still below the cycle high of 93.2% in December. Growth in capacity in the manufacturing sector continues to strengthen, up 1.0% y/y, though capacity is still slightly below its 2008 peak.

Industrial production and capacity data and US Population-Weighted Heating and Cooling Days are included in Haver's USECON database. Additional detail on production and capacity can be found in the IP database. The expectations figures come from the AS1REPNA database.

Industrial Production (SA, % Change) Apr Mar Feb Apr Y/Y 2018 2017 2016
Total Output -0.5 0.2 -0.5 0.9 3.9 2.3 -2.0
Manufacturing -0.5 0.0 -0.5 -0.2 2.3 2.0 -0.8
    Consumer Goods -1.2 0.4 0.2 -2.5 2.1 0.5 0.6
    Business Equipment -2.1 0.7 -1.1 0.1 3.2 3.6 -5.3
    Construction Supplies -0.7 0.1 -1.7 0.4 2.8 3.5 0.9
  Materials 0.2 -0.1 -0.6 3.2 5.9 2.7 -3.0
Utilities -3.5 2.2 0.7 -4.7 4.4 -0.8 -0.4
Mining 1.6 -0.4 -1.0 10.4 12.4 7.4 -9.9
Capacity Utilization (%) 77.9 78.5 78.5 78.8 78.7 76.5 75.0
  Manufacturing 75.7 76.2 76.2 76.6 76.6 75.1 74.2
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