Industrial production rises while manufacturing output falls

Industrial production was stronger than expected in June, rising 0.1%. However, manufactured production declined 0.4% in June. Business equipment output rose 0.9% in June and has increased 17.3% at an annual rate over the last three months.

BOTTOM LINE

Manufacturing cooled a little in June according to the Fed’s industrial production data, although overall industrial activity was boosted by electricity output, likely reflecting a greater than usual pick up in temperatures in June from May. We expect part of the weakness in manufacturing will be revised away over the next two months as more data become available on physical output. Within manufacturing, there is notable strength in business equipment (up at a 17.3% annualized rate since March), computer and office equipment (32.2%), and home electronics (48.1%). We also saw considerable strength in capital goods imports in recent months and we expect that investment spending (especially on technology products) will help buoy economic growth in the second half of the year. From the Fed’s output-gap perspective, there is still plenty of spare capacity and it would take close to two years of growth at the pace seen over the last year to push capacity utilization over 80%.




Source RDQ

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