September 15, 2020 | 09:47
U.S. Industrial Production Drifts Off-Course
U.S. industrial production was disappointing in August, though it was understandable. Total production rose just 0.4%, which was about half of what consensus was looking for. However, the upward revisions to the prior three months made up for it.... July's 3.0% gain is now 3.5%; June's 5.7% increase is now 6.1%, and May's 0.9% rise is now 1.0%. It was a tough month, as Mother Nature wreaked some of her anger across the country, unleashing the likes of Isaias, Kyle, Laura, and Marco, while the wildfires on the West Coast likely also had an impact. Of the three major categories, mining and utilities took a hit, down 2.5% and 0.4%, respectively. Manufacturing, however, which weighs in at a hefty 76% of the index, managed to increase for the fourth straight month, though the 1.0% improvement was the smallest increase of the bunch.
Segue to September .... there was a piece of encouraging data released earlier: the Empire State manufacturing survey was stronger-than-expected at a 2-month high of +17.0 in September, or up 2.7 pts on an ISM-adjusted basis to 52.5.... after a brief contraction. The six-month outlook, which is arguably more interesting, brightened to a 3-month high of 40.3, lifted by key new orders and shipments. Even capital spending plans rose sharply. Granted this is only one region of the entire U.S. but it is worth noting.
The overall increase in production lifted the capacity utilization rate 0.3 ppts to 71.4% (still far from inflation-sparking territory), while manufacturing rose to a 2-month high of 70.9%.
The Bottom Line: The economic recovery is soldiering on, but the momentum is slowing.
On a separate note ..... the 2020 Institutional Investor survey is now underway! We are always grateful for your support and hope our ongoing commitment to providing best-in-class economic research and analysis earns your vote. Thank you!
To request a ballot: https://voting.institutionalinvestor.com/welcome
Our handy Voting Guide makes the process easy to navigate: https://bmointeractive.com/gfirt2020/