September 15, 2021 | 09:50
U.S. Industrial Production Still Producing, With Some Capacity Pressures
Economic pulse check!
U.S. industrial production .... still beating. Production rose 0.4% in August (or 5.9% y/y), in line with expectations and on the heels of a slight downward revision to July (was 0.9%; now 0.8%) and upward revision to June (was 0.2%; now 0.5%). See Chart 1. Good news, obviously, but the details weren't perfect. Mining fell 0.6% (Henri and Ida?), while utilities jumped 3.3%. Manufacturing, the biggest component at 75% of the index, inched up just 0.1%, following a 1.6% jump in July. Production of motor vehicles and parts squeezed out a 0.1% increase, but are still down 4.9% y/y. What can you do when you don't have enough parts to complete the car? Put things on pause. Excluding motor vehicles and parts, output was up a steady 0.4%, or 6.6% y/y, which is good news, but the auto sector is a big player in all of this; it cannot be ignored.
At least the first September reading for factory activity was encouraging. The Empire State Manufacturing Survey jumped this month... the diffusion index nearly doubled to 34.3, from 18.3 in August. On an ISM-adjusted basis, that works out to a 2-month high of 62.9, from the 5-month low of 56.7 in the prior period.
So how about those pricing pressures? That subject has some degree of intrigue these days. The total capacity utilization rate rose 0.2 ppts to a near two-year high of 76.4%. So more pressure. See Chart 2.
There were some other measures of inflation this morning worth mentioning ....
Score 2 for the "transitory" crowd? Another sign of cooler temps on the inflation front .... but it is sort of like saying "It's only 85 degrees today; last week it was 90. What a relief!" U.S. import prices actually fell.....yes, fell ... 0.3% in August (not seasonally adjusted), the first decline since last October, and the largest in 1½ years, weighed by industrials and energy. From a year-ago, import costs still soared 9% but at least this is the first single-digit reading since March. See Chart 3. And the prices components from Empire State .... wow. See Chart 4 below for the visual. Still high.
Bottom Line: Inflation took a little breather in August, but the race/marathon isn't over yet.