July Industrial Production

Updated 27-Aug-08 09:06 ET

Highlights

The second straight month of increase for industrial production shows that resilience of the manufacturing sector to weakness in other sectors of the economy.
The manufacturing component of production was up for the second straight month, as the end of the auto parts strike helped boost this core component. Further modest gains are likely, as factor orders have remained strong.
The decline in utilities reflected cool weather across the country, which reduced demand for air conditioning. It should be near flat in July.
Mining ouput posted a solid gain of 0.9%. The rate of increase will probably slow in the months ahead.

Surprising resilience in manufacturing is a major reason the period of weak economic growth late last year and early this year did not turn into a recession. Industrial production in June was 0.3% above the year-ago level. In recessions, production tends to drop sharply to well below year-ago levels. For example, just prior to the 2001 recession and through 20021 and into early 2002, industrial production fell every single month. Fourteen straight monthly declines were posted, with an average decline of 0.5% per month. Year-over-year production fell to -5%. This cycle, there have been monthly declines and a leveling off in production, but that reflects considerable resilience relative to the 2001 recession.

Category	Jul	Jun	May	Apr	Mar
Industrial Production
Total Index	0.2%	0.4%	-0.2	-0.7	0.1
Manufacturing	0.4	0.1	-0.1	-0.9	0.2
Utilities	-1.9	2.1	-2.1	0.4	-1.5
Mining	0.9	1.1	0.3	-0.4	0.1
Capacity Utilization
Total Industry	79.9	79.8%	79.6	79.9	80.5
Manufacturing	77.7	77.5	77.6	77.7	78.5