May Industrial Production
Updated 16-Jun-09 09:58 ET
Highlights
- The market wasn't looking for much out of the May Industrial Production report and it got what it wasn't looking for. Industrial production declined -1.1% in May after a downwardly revised -0.7% decline for April while capacity utilization dropped to 68.3% from 69.0%, which is the lowest level since records began in 1967.
- Manufacturing output was the biggest drag, declining -1.0% in May after a -0.6% decline in April. In turn, the factory operating rate hit a historical low of 65% in May, which is the lowest since records began in 1948.
- The output of mines dropped -2.1% while the output of utilities fell -1.4%.
Key Factors
- Production of consumer goods dropped -0.8% in May, with declines in both consumer durables and nondurables. Business equipment output was down -1.4% and is more than 16% below the year-ago period, underscoring the broad-based and deep nature of the economic slowdown.
- Overall, industrial production is down -13.4% year-over-year. This report, quite simply, isn't good economic news and shows the roots of the green shoots recovery don't run that deep at this point.
Big Picture
- The outlook for industrial production has worsened. Production held up surprisingly well through most of 2008 due in part to strong exports. Exports grew at a 7.0% annual rate in 2005, 9.1% in 2006, 8.4% in 2007, and at an annual average rate of 7.8% through the first three quarters of 2008. A major factor in this boom was a continually weakening dollar. Now, the dollar has strengthened and global economies are in recession. This will undermine export growth and take away a major support for US industrial production. US companies will also be impacted by the weak economic outlook. Production is therefore likely to trend lower.
| Category |
MAY |
APR |
MAR |
FEB |
JAN |
| Industrial Production |
|
|
|
|
|
| Total Index |
-1.1% |
-0.7% |
-1.8% |
-0.8% |
-2.1% |
| Manufacturing |
-1.0% |
-0.6% |
-1.9% |
-0.1% |
-2.7% |
| Utilities |
-1.4% |
0.7% |
-1.1% |
-4.5% |
0.2% |
| Mining |
-2.1% |
-3.2% |
-1.9% |
-1.8% |
-0.5% |
| Capacity Utilization |
|
|
|
|
|
| Total Industry |
68.3% |
69.0% |
69.4% |
70.7% |
71.2% |
| Manufacturing |
65.0% |
65.6% |
65.9% |
67.1% |
67.1% |
