Industrial Production Report Flat

The factory sector isn't showing much life based on the Federal Reserve's industrial production report where the manufacturing component managed only a 0.1 percent increase in September which is 3 tenths below Econoday's consensus and only the 2nd gain in 5 months. August manufacturing is revised 1 tenth higher to minus 0.2 percent but July, a month free of hurricane effects, is revised sharply downward from unchanged to minus 0.4 percent.

The report's 2 other components bounced back into positive ground in September, up 0.4 percent for mining and up 1.5 percent for utilities. Mining volumes have been very strong this year with this component up 9.8 percent from a year ago while utility output, in contrast, is down 4.1 percent.

Turning back to manufacturing, production is up only 1.0 percent year-on-year, pulled down by a 3.2 percent yearly decline for motor vehicles & parts which, like the manufacturing headline, managed only a 0.1 percent gain on the month. Excluding vehicles, manufacturing still sits with only a 0.1 percent monthly gain. The report's selected hi-tech component is September's highlight, up 1.7 percent on the month for a 2.3 percent yearly gain.

But there are not a lot highlights in today's report as the weakness in manufacturing, given this year's enormous strength in private reports like Empire State and ISM, remains an unfortunate surprise. One plus is that hurricane effects, though visible in August's mining and utility output, proved limited. Overall capacity utilization in September came in at 76.0 percent which is 2 tenths below the consensus.

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

Recent History Of This Indicator:
However much diffusion reports like Empire State have been recording strength, the Federal Reserve's industrial production report has been showing weakness for manufacturing: a 0.3 percent decline for the component in August, no change in July, a 0.2 percent gain in June, and a 0.5 percent drop in May. But the weakness in August was tied at least in part to one-time effects from Hurricane Harvey and forecasters are calling for a 0.4 percent September gain. But the outlook for the total industrial production, the result of uncertainties over hurricane effects on mining and utility demand, is very wide, from minus 0.9 percent to plus 0.8 percent with the consensus at plus 0.2 percent. Capacity utilization is seen at 76.2 percent vs 76.1 in August.