Factory Sector Flat

Flat is the best word to describe the factory sector right now. The latest evidence is the industrial production report which inched up only 0.1 percent in September with August revised 1 tenth lower to minus 0.5 percent. These two months follow, however, solid 0.5 percent gains in June and July which, when averaged all altogether however, extend what has been a flat two years for the industrial economy.

Manufacturing production did rise a nearly respectable 0.2 percent but follows a downwardly revised 0.5 percent decline in the prior month. Motor vehicle production, which was strong during the summer, was flat in September, up 0.1 percent. High-tech production bounced 0.6 percent higher to help drive the overall gain for manufacturing. A negative, however, is a second straight decline in business equipment, down 0.2 percent and 0.5 percent the last two reports.

Mining is a positive in the report, up 0.4 percent though following a 1.0 percent decline in August. Year-on-year, mining production is down 9.4 percent. Utility production is a negative in the September data, down 1.0 percent. Here, the year-on-year decline is only 0.4 percent. Capacity utilization came in at 75.4 percent vs a downwardly revised 75.3 percent in August.

Year-on-year, industrial production is down 1.0 percent with manufacturing dead even at zero percent. The 2014 collapse in oil prices and its hit on demand for energy equipment pulled the factory sector into low single digit contraction, which is where it continues to struggle.

Recent History Of This Indicator:
Industrial production, and the component for manufacturing production, showed solid life in both June and July but not in August as both readings fell 0.4 percent. Forecasters see only a limited rebound for September, with the industrial production consensus at plus 0.2 percent and manufacturing at only plus 0.1 percent. But there have been recent positives including strength in vehicle production and also emerging gains for the deeply depressed mining component. The capacity utilization rate is expected to edge 1 tenth higher to 75.6 percent.