Steel Products

Indicators Suggest Manufacturing has Slowed

Written by Peter Wright

Industrial production and manufacturing capacity utilization for July 2013 – Both these data points are reported in the Federal Reserve G17 data base. The IP index was reported as 98.95 for July, up from 98.91 in June this was 1.8 percent below the peak of September 2007.

Manufacturing is still making progress. The three month moving average of the IP index has been flat for four months and its year over year growth rate has slowed for three straight months (Figure 1). Of the manufacturing data streams that we at SMU track, this is the least upbeat. The ISM manufacturing index was up by 3.1 percent in July, auto production was growing at an 8.1 percent annual rate through June, durable goods were up by 7.4 percent in three months through July and the Chicago Fed manufacturing index was up by 3.0 percent. Manufacturing added 18,000 jobs in July. Overall manufacturing indicators suggest that manufacturing year over year has slowed but still has a growth rate of > 2 percent.

Moody’s concludes as follows: “Manufacturing is strengthening, but the July industrial production report shows that the turn up is progressing a bit more slowly than anticipated. Fortunately, signs point to manufacturing strengthening. Auto production schedules show a pickup in August, and the early regional manufacturing surveys for the month are generally encouraging for growth. The headline readings for both the New York Fed and Philadelphia Fed remained in positive territory. Forward-looking details weakened some but are consistent with increased production ahead. The backdrop is increasingly supportive of manufacturing improvement. Earlier weakness in production has left inventories lean, implying that manufacturers will need to ramp up production if demand strengthens. Prospects are encouraging in this regard. Export growth accelerated sharply into midyear thanks to better growth overseas and in Europe in particular, and consumer spending is off to a good start this quarter based on the July retail sales figures.”

Manufacturing capacity utilization was 75.77 percent in July with a 3MMA of 75.88 percent. The three month moving average was down very slightly from June and was exactly the same as July last year (Figure 2).

{amchart id=”86″ Manufacturing Capacity Utilization- Monthly 3MMA}

{amchart id=”85″ US Industrial Production Index }

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