Industrial Production May Not Be as Tame as It Seems

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The Federal Reserve released its most recent views on industrial production in the United States on Tuesday. September’s report said production increased by 0.3% on a seasonally adjusted basis. The Wall Street Journal’s consensus estimate from Dow Jones had been for a gain of 0.2%.

What should matters here is that September marks the end of the third quarter, and the Fed indicated that total industrial production rose at an annual rate of 3.3% for that quarter.

At 108.5% of its 2012 average, total industrial production was 5.1% higher in September than in the same month of 2017.

September’s manufacturing output rose by 0.2% for the fourth consecutive month. The output from utilities was unchanged at 105.2.

One area of larger strength was mining. The mining index rose by 0.5%, from 124.3 in August to 124.8 in September, and that marked an eight-month consecutive gain. To prove how much this has risen: it was up 13.4 points from September of 2017. Other aspects were seen below for each major market group:

  • Consumer goods rose from 105.9 in August to 106.1 in September.
  • Business equipment rose from 100.9 in August to 101.7 in September.
  • Construction fell from 114.4 in August from 113.7 in September.

Capacity utilization for the industrial sector, which has continued to run under the 80% reading for far too long, was unchanged at 78.1%. That is 1.7 percentage points below its long-run average of the prior decades.

All in all, industrial production seems muted on the monthly gains until you look at the broader annual gains, which all feed into GDP calculations. This report was also pretty much in line with the previous two months, and while it may feel weak there was some storm impact from Hurricane Florence. The Fed’s report said:

Output growth in September was held down slightly by Hurricane Florence, with an estimated effect of less than 0.1 percentage point.

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