Industrial Production At Low End Of Consensus

A jump in utility output couldn't save industrial production in July which, pressured by contraction in both manufacturing and also mining, came in near the low end of Econoday's consensus range with a 0.2 percent decline. Utilities, where production is affected by the weather and where results are often volatile, jumped 3.1 percent in the month following a 3.3 percent June decline. Outside of this component, however, positives in the July report are scarce.

Manufacturing production fell 0.4 percent in the month to miss the low end of the consensus range. Construction supplies fell 1.0 percent in the latest uneven indication for this sector while motor vehicles, where production had been on the rise, edged back 0.2 percent. Business equipment, an area of particular concern for the Federal Reserve, fell 0.4 percent in the month. Mining, which along with manufacturing and utilities is the third major component in the report, has been contributing strongly to total growth for the past couple of years but not in July as output fell 1.8 percent.

The weakness in this report was signaled by declines in hours worked in the July employment report, yet the results are more negative than expected and will boost arguments at the Federal Reserve for further interest rate cuts. The Fed is especially focused on manufacturing, a sector that is directly exposed to global slowing and global trade tensions and which is structurally considered to account for most of the domestic economy's cyclical variation.