Manufacturing, consumer good and construction supply output all rise

Industrial production was stronger than expected in July, rising 1.0%. Manufactured production increased 1.1% and has expanded at a solid 7.2% annualized rate over the last three months.

Business equipment output jumped 1.8% in July, while production of consumer goods increased 1.1% and construction supply output rose 0.5%. Over the last three months business equipment production has increased by 16.1% at an annual rate.

BOTTOM LINE

The decline in manufactured output in June was rather odd given the strength shown by the ISM survey and we think that June and July need to be averaged together to get a better reading of the trend in industrial production. If we do this using three-month growth rates, we see only a very slight slowing in output growth and we see a continued pickup in the rate of business equipment production. July’s manufactured output stands 7.3% above its second-quarter average, while output of business equipment is up 17.1% on the same comparison. With the trade data also showing very strong growth in capital goods imports, the evidence continues to grow that investment spending by businesses is picking up sharply. It is, however, worth noting the rapid growth in motor vehicle output over the last three months (up 65.1% at an annual rate; July’s jump in vehicle production was likely the result of fewer seasonal shutdowns early in the month) and that manufactured output excluding motor vehicles in July was up 4.5%, which is slower than in recent months but nonetheless represents a very solid increase in production.

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