Industrial Production Report Soft, Manufacturing Volumes Rise

A respectable 0.3 percent rise in manufacturing volumes is the takeaway from a deceptively soft industrial production report for July which managed only a 0.1 percent headline gain to come in at the bottom of Econoday's consensus range. Pulling down the headline was a rare 0.3 percent decline in mining volumes and a third straight decline, at minus 0.5 percent, for utilities where weather is always a factor. An important offset to July is a sharp upward revision to June which now stands at a 1.0 percent overall gain and which reflects upward revisions to both mining, now at a 2.9 percent rise in the prior month vs an initial 1.2 percent, and also utilities which are now at a 0.7 percent June decline vs an initial dip of 1.5 percent.

The gain in manufacturing is centered in vehicle production which rose 0.9 percent in July to offset a subdued 0.1 percent gain for the selected hi-tech category. And production of business equipment was especially strong in the month, at a 0.8 percent gain vs no change for consumer goods. Construction supplies, down 0.1 percent, fell for a second month and won't be helping shortages in the industry.

Capacity utilization was unchanged in July at 78.1 percent which is a moderate rate that points, despite all the warnings of stress in regional and private reports, to spare capacity still remaining in the industrial sector, a factor that will help limit goods inflation. The dip in mining aside (where by the way the year-on-year gain is a scorching 12.9 percent), this is a very solid report consistent with general economic strength.

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