Tuesday, July 17, 2007

Industrial Production Up

From the Federal Reserve:

Industrial production rose 0.5 percent in June after a decrease of 0.1 percent in May. At 113.4 percent of its 2002 average in June, total industrial production was 1.4 percent above its year-earlier level. Manufacturing output moved up 0.6 percent in June; excluding motor vehicles and parts, factory output increased 0.4 percent after having been unchanged in May. In June, the output indexes for mining and utilities registered gains of 0.5 percent and 0.3 percent respectively. For the second quarter as a whole, total industrial production advanced at an annual rate of 2.9 percent after an increase of 1.1 percent in the first quarter. Capacity utilization for total industry moved up to 81.7 percent in June; the rate was 0.6 percentage point below its level in June 2006 but 0.7 percentage point above its 1972-2006 average.

This jibes with yesterday's Empire State manufacturing report, which showed gains as well.

There were increases across the board: consumer goods, business equipment and construction all saw gains. Business equipment is up 3.4% Y/Y. However:

The index for business equipment was unchanged in June for a second consecutive month, but it advanced at an annual rate of 3.6 percent in the second quarter

Automotive production is ramping up:

After little change in the first quarter, the production of automotive products surged at an annual rate of 20.7 percent in the second quarter.

The housing slowdown is clearly having an effect:

The output of home electronics recovered 2.6 percent in June after a decline of the same amount in May. The index for appliances, furniture, and carpeting fell 0.5 percent in June; production increased at an annual rate of 0.8 percent in the second quarter after declines in each of the preceding six quarters.

One of the central themes of the bull's argument going forward is an increase in manufacturing capacity and activity. So far this month, we are getting a decent confirmation of that trend.