Global| May 15 2009U.S. Factory Production Shortfall Eases
by:Tom Moeller
|in:Economy in Brief
Summary
The severity of the downturn in industrial output eased last month, according to the industrial production figures published by the Federal Reserve. Output, which includes mining and utilities, declined an expected and moderate 0.5%, [...]
The severity of the downturn in industrial output eased last month, according to the industrial production figures published by the Federal Reserve. Output, which includes mining and utilities, declined an expected and moderate 0.5%, which was by far the smallest decline of this recession. The drop followed declines between one and four percent during the prior several months. Declines in the factory sector alone have eased as well. The 0.3% April shortfall was the smallest since February and compares to monthly declines between one and three percent during this recession.
Output of consumer goods overall was unchanged last month and the year-to-date rate of decline eased to 7.3%. Last month, production of autos actually increased, though it's down at a 44.4% rate this year. Conversely, furniture output posted a 2.8% decline last month and it's down at a 23.7% rate so far this year as consumers continue to shy away from purchases of large durable goods. Apparel output fell 1.3% and the three-month rate of -17.3% is half that of its worst. Even the pace of the decline in the production of business equipment seems to have eased with a 0.5% decline, though the three-month rate was near its worst at -23.6%. The downturn in the housing market continued to lower output of construction supplies. It fell 1.1% and the three-month rate of decline eased to a "modest" 23.4%. 
Even in the high-tech sector the rate of decline in output slowed. Here, industrial production fell 0.8% last month and at a reduced 13.5% rate during the last four. Less high tech, overall industrial production fell a reduced 0.4% last month and the annual rate of change eased to -15.3%.
O.K., so the slowing pace of output declines is largely in autos and the high-tech sector. But outside of these two sectors, output moderated to a 0.5% decline last month, less than one-third the March drop. The three-month rate of decline was still near its worst at a -13.4% annual rate.
Excess capacity grew even further last month. Capacity utilization fell to 69.1%, a record low for the series which dates to 1966. Utilization in the factory sector dropped even harder to 65.7% from a peak near 80% back in 2007. The latest rate was a record low since WW II.
The industrial production data are available in Haver's USECON database.
Ties that Bind: Bilateral Trade's Role in Synchronizing Business Cycles from the Federal Reserve Bank of Dallas is available here.
| INDUSTRIAL PRODUCTION (SA, %) | April | March | Y/Y | 2008 | 2007 | 2006 |
|---|---|---|---|---|---|---|
| Total Output | -0.5 | -1.7 | -12.5 | -2.2 | 1.5 | 2.3 |
| Manufacturing | -0.3 | -2.1 | -14.5 | -3.2 | 1.4 | 2.5 |
| Consumer Goods | 0.0 | -0.3 | -6.6 | -2.6 | 0.9 | 0.4 |
| Business Equipment | -0.5 | -2.9 | -13.9 | -1.1 | 2.7 | 9.4 |
| Construction Supplies | -1.1 | -2.8 | -20.0 | -6.3 | -2.0 | 2.3 |
| Utilities | 0.5 | 1.8 | -3.2 | 0.3 | 3.4 | -0.6 |
| Capacity Utilization | 69.1 | 69.4 | 79.2 (April '08) | 77.6 | 80.6 | 80.9 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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