Tuesday, November 23, 2010

Industrial Production Unchanged

I didn't get to this last week, but wanted to go into detail now while I've got time:

From the Federal Reserve:

Industrial production was unchanged in October after having fallen 0.2 percent in September. For the manufacturing sector, output gained 0.5 percent in October after having risen 0.1 percent in September. Factory production in September was initially reported to have decreased 0.2 percent, but incoming data on steel, fabricated metal products, machinery, and chemicals helped boost the index. The output of utilities dropped 3.4 percent in October, as unseasonably warm temperatures reduced demand for heating. Production at mines fell 0.1 percent. At 93.4 percent of its 2007 average, total industrial production in October was 5.3 percent above its year-earlier level. The capacity utilization rate for total industry was flat at 74.8 percent, a rate 6.6 percentage points above the low in June 2009 and 5.8 percentage points below its average from 1972 to 2009.
Notice that a big reason for the neutral was a a 3.4% drop in utilities, caused by warm weather. Also note that manufacturing increased .5% and September's number had stronger inputs from other manufacturing components.

Let's look at some smaller components of the index:

The output of consumer goods was unchanged in October. The production of consumer durables rose 0.8 percent. Within durables, the indexes for automotive products and for appliances, furniture, and carpeting each increased 1.1 percent. Gains in the production of miscellaneous goods and of home electronics were smaller, at 0.2 percent and 0.3 percent, respectively. The production of nondurable consumer goods declined 0.2 percent; a fall of 3.2 percent for the energy category, which primarily resulted from a decrease in the index for residential utilities, more than offset an increase of 0.7 percent for the non-energy category. Within non-energy nondurables, the index for clothing advanced 2.0 percent, and the indexes for foods and tobacco and for chemical products moved up at lesser rates; the index for paper products moved down.

First, notice there were big increases in the consumer non-durables number, and that increase was due to large increased in auto and housing related appliance production. In addition, consumer non-durable goods also saw increase, which were masked by the fall in energy production.

Let's look at this data from another perspective:

Production in manufacturing rose 0.5 percent in October, and the factory operating rate moved up to 72.7 percent, a rate 6.5 percentage points below its average from 1972 to 2009. The output of durable goods increased 0.9 percent, with increases in most major categories. After having declined the previous four months, the output of wood products jumped 2.5 percent; the indexes for nonmetallic mineral products and for electrical equipment, appliances, and components also increased by 2.0 percent or more. Within durable manufacturing, only the index for primary metals fell, at a rate of 0.4 percent.

The production of nondurable goods moved up 0.2 percent in October after having risen 0.4 percent in September. The output of apparel and leather increased by the largest proportion, and the production of food, beverage, and tobacco products, of paper, and of plastics and rubber products also rose. The indexes for printing, for petroleum and coal products, and for chemicals declined. The index for other manufacturing (non-NAICS), which consists of publishing and logging, was unchanged after having declined in the previous four months.

Mining production edged down 0.1 percent in October, and its utilization rate fell to 87.9 percent, a rate 0.5 percentage point above its average from 1972 to 2009. The index for utilities dropped 3.4 percent; the output of electric utilities declined for a third consecutive month, while the output of natural gas utilities fell for a second month in a row. The operating rate for utilities decreased 2.8 percentage points, to 76.6 percent.

Notice again the large number on increases that exist in the index -- and both durable and non-durable manufacturing increased overall. The main drawback was a drop in utilities production and not goods.