Industrial Production Rises Strongly

Industrial production rose a solid 0.3 percent in September with manufacturing production up 0.2 percent. Mining production remains the standout component in the report, up 0.5 percent in the month for a 13.4 percent year-on-year increase. Utility production has also been a solid component though this was unchanged in the month for a year-on-year 5.4 percent increase.

Focusing on manufacturing which makes up nearly 3/4 of all industrial production, this yearly rate is up 3.5 percent. This looks like a modest rate of growth but this report tracks volumes and when adding in the rate of inflation, growth is closer to 6 percent which is strong.

Motor vehicles have been a central strength, jumping 1.7 percent in September for a 7.0 percent on-year rate. Selected hi-tech has also been strong, up 0.6 percent in the month for a yearly 6.9 percent gain.

Other groupings in manufacturing include a 0.2 percent gain for materials where the on-year gain is still a very strong 8.0 percent. Business equipment production, which surged 1.0 percent in August, jumped another 0.8 percent in September with annual growth at 3.6 percent. Consumer goods increased 0.2 percent in September for a yearly 2.5 percent.

Weakness in manufacturing has been in nonindustrial supplies, unchanged in the month for a 2.0 percent annual gain, with the subcomponent of construction supplies, likely reflecting tariff constraints, down 0.6 percent in September but still at 2.4 percent annual growth.

Overall capacity utilization has been tightening but is unchanged at a still moderate 78.1 percent with manufacturing utilization, which also has been on the rise, up 1 tenth to 75.9 percent.

The manufacturing component of this report, even when adding in inflation, has yet to show the double-digit strength of factory orders and shipments nor even a shadow of the strength of small sample surveys like Empire State and ISM. Yet the gains for vehicles, hi-tech and especially business equipment are pluses that do point to positive momentum. And year-on-year growth for overall industrial production is very strong at 5.1 percent. Watch tomorrow for the Philly Fed's October update on manufacturing.

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