Industrial Production Swings Upward

An upward swing in utility output pulled industrial production 0.7 percent higher in April in a report that on balance, however, shows only modest strength at most. The manufacturing component is the best news in the report, up 0.3 percent in the month for a year-on-year rate, however, of only 0.4 percent which is a strong reminder of how weak the factory sector has been.

Vehicles, despite mostly weak sales this year, remain a central plus, up 1.3 percent in the month for a year-on-year gain of 4.3 percent which easily tops other readings in the report. But production of business equipment has been weak, down 0.5 percent on the year though this reading did jump 0.8 percent in April. Production of consumer goods is showing a little more strength, up 1.3 percent on the year and 1.2 percent in the month. Mining is the report's major weakness, down 2.3 percent in April for a year-on-year decline of 13.4 percent and showing no lift whatsoever yet from the rebound underway in oil prices.

The gains in this report are limited but still welcome, pointing to a steady but flat factory sector that still looks to get an upcoming boost from weakness in the dollar (a plus for exports) and strength in oil prices (a plus for energy equipment and mining).

Note that the traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.

Recent History Of This Indicator:
Weakness for vehicles has been a major factor holding down industrial production this year, especially in the last report for March. But even vehicles aside, this report has been very soft with many readings in decline especially mining where, hit hard by low commodity prices, year-on-year contraction has been in the low double digits. But oil prices have firmed and the dollar has been depreciating, both pluses for demand with the lower dollar a special plus for exports. A snapback in April is expected with the Econoday consensus calling for a 0.2 percent gain overall and a 0.2 percent gain for the manufacturing component. The capacity utilization rate, which has been depressed and in turn keeping down the cost of goods, is expected to rise 1 tenths to 74.9 percent.