July 2018 Industrial Production
Submitted by Atlas Indicators Investment Advisors on August 31st, 2018
Industrial output edged up 0.1 percent in July 2018 after rising 0.5 percent in June according to the Federal Reserve’s report on Industrial Production. This indicator is meant to measure everything physically produced or mined in America. July’s uptick puts the year-over-year tally up 4.2 percent.
Results were mixed within the three major industry groups. Starting with the dour stuff, utilities output fell for a third consecutive period, dropping 0.5 percent, but is up 2.3 percent in the past year. Mining output also declined, falling 0.3 percent, but this follows five consecutive increases; growing oil and gas extractions were outweighed by declines in other mining and mining support activities.
Now on to the positive portion. Manufacturing is the largest component of industrial production, and it increased 0.3 percent. Durable goods rose 0.4 percent, suggesting bigger ticket items are being produced. Simultaneously, nondurable wares increased 0.2 percent. Only the logging and publishing index fell in the period. All told, this latest rise for manufacturing puts the year-over-year tally at +2.8 percent.
Capacity utilization is also reported in this release. This measures what proportion of the nation’s industrial potential is being used. It reached 78.1 percent, unchanged from the upwardly revised count in June (originally 78.0 percent). Capacity utilization is now 1.7 percentage points below its long-run average of 79.8, suggesting the nonservices segment of the economy is not overstressed and can produce more if demand requires additional output.
Industrial production continues indicating that the economy is doing well. Output is growing, but spare capacity remains. This indicator’s largest component, manufacturing, is cyclically sensitive, tending to move with the contours of the economy, and the curve continues to have a positive slope.