- by New Deal democrat
There’s a brief hiatus from new data early this week, so let me briefly look at the manufacturing economy, for which industrial production was reported on Friday.
To briefly recap my overall position: despite the chaos coming out of Washington, the economy has been on a moderate rebound this year, albeit with inflationary problems in part still due to tariffs and in part due to the continued closure of the Strait of Hormuz. Meanwhile the AI Boom (or, more likely, bubble) in the building of data centers has been powering stock market gains, which in turn are powering “wealth effect” spending by the upper income tier. If either or both of those trends reverse, we’re in trouble. But they haven’t stumbled, yet.
And manufacturing continued to improve in June, according to the report. While manufacturing production (red) was unchanged, gas and electric utility production (most closely tied to the data center Boom, gold, right scale) increased 0.4%, leading the total figure (blue) to increase 0.1% to a new post-pandemic record:
On a YoY basis, manufacturing production was up 1.1%, while utility production was up 2.8% - again showing the strong influence of data center building. Total industrial production was also up 1.1%:
Interestingly, the YoY change in utility production suggests that the Boom in data center construction may be abating somewhat.
This is similar to what we see in the average of the New York and Philadelphia Fed headline manufacturing indexes (blue) and new orders component (red):
Both of these are at 4+ year highs, suggesting that the improvement in manufacturing that we started to see late last year is continuing.