Overall industrial production (top chart) has stalled for the last nine months, while capacity utilization has done so over the last 10 months.
The latest ISM report shows two months about the 50 level, which is the line between expansion and contraction. However, the internals of the report were not that great. Consider that 8 of 18 industries were expanding while 8 were contraction and 2 were neutral. Those are not the type of numbers that indicate strong growth. Also consider the anecdotal information from the report:
"Market is still very soft." (Paper Products)
"Business is picking up." (Furniture & Related Products)
"[Our] 4th quarters usually begin to show a slowdown in demand, and this year is no different; prices are also dropping." (Wood Products)
"Demand down slightly due to customers pre-buying ahead of announced material price increases." (Plastics & Rubber Products)
"The slowing of capital expenditure in Europe and China has lowered our backlog for Q4." (Computer & Electronic Products)
"We see a general softening in the steel and automotive markets in the fourth quarter." (Fabricated Metal Products)
"Cuts in healthcare reimbursement rates continue to negatively affect top-line revenue." (Miscellaneous Manufacturing)
"Business conditions stable to slightly improving." (Transportation Equipment)
"Sales and order intake have slowed." (Primary Metals)
"Europe is still very much a concern. Global recovery is still fragile." (Chemical Products)
I've emboldened the negative comments, which comprises the majority of those listed. Two deal specifically with international issues while others simply note a slowdown in orders.
Let's look at two more data sets from the ISM report:
The new orders index as printed two months of positive numbers. However, before that the chart shows three months of contraction, making the last five months pretty much a statistical wash.
The overall production index printed a positive number in the last report, but that was the first number in three months. And, like the new orders index, the overall level for the last five months is a statistical wash.
Also consider this information from the latest Beige Book:
Conditions in the manufacturing sector were mixed since the last report, though on balance, more Districts reported that conditions had improved than worsened. The Boston, Richmond, Atlanta, St. Louis, Kansas City, and San Francisco Districts reported that activity expanded, though growth was generally seen as modest. Activity was reported as mixed in the Dallas District, while the New York, Chicago, and Minneapolis Districts reported that activity weakened, though declines were mild for the latter two. Significant gains in manufacturing related to the construction, energy, and transportation sectors were reported across several Districts, with particularly robust gains tied to the automotive industry. There were exceptions in the Kansas City and Dallas Districts where manufacturing related to transportation equipment was reported as mixed.
Steel production was said to be flat in the Cleveland and San Francisco Districts, and lower in the St. Louis District. Activity related to machinery and equipment was reported as lower in the Philadelphia, Chicago, and Kansas City Districts. Weaker sales growth in the high tech industry was reported by Dallas, and Kansas City said that growth among high-tech firms remained sluggish in its District. The Boston District noted some weakness in the semiconductor industry, while the San Francisco District said that new orders from the semiconductor industry had improved. Manufacturing contacts in the St. Louis District were tentative about the outlook for 2013, and contacts in the Dallas District noted some uncertainty about the outlook due to the upcoming election.
While the first paragraph notes growth, it's modest. However, the second paragraph notes several areas of weakness. In short, it's a very mixed report.
