It seems as though--to use an old refrain that is familiar to music lovers--the hits keep coming. Specifically, one day after the U.S. Commerce Department issued much better-than-expected results for September retail sales, this same government agency issued favorable metrics on industrial production and capacity utilization.
For example, after plunging by a downwardly revised 1.4% in August (initially estimated as a decline of 1.2%), the government reported that industrial production had advanced by a modest, but better-than-expected, 0.4% in September. That was twice the nominal 0.2% increase that had been widely forecast by economists for the latest month.
Broken down, the latest data showed that manufacturing (the largest component in the overall mix) rose, but by just 0.2% in the most recent month. At the same time, two lesser proportionate components, mining and utilities, gained more impressively, rising by 0.9% and 1.5%, respectively, last month. These are more volatile contributors than manufacturing. To wit, utility usage, up the aforementioned 1.5% in September, had plunged by an outsized 4.3% in August. Mining use, up as noted by 0.9% last month, had fallen by 1.6% in the prior month. Hurricane Isaac, which struck the Gulf Coast in August, and exacted a major toll on that region, was a big factor in the poor showing that month.
As to the capacity utilization component, it rose to 78.3% in September, three-tenths of a percentage point ahead of the 78.0% reading recorded in August. That was also slightly better than the 78.2% that had been estimated. This figure, meantime, remains a bit below the 1972-2011 average of just above 80%.
For the third quarter as a whole, industrial production fell by 0.4%, a clearly disappointing showing for this critical business sector, and underscores the likelihood that third-quarter GDP growth, albeit now looking as though it was a tad greater than the 1.5% that we had been expecting, may not be materially better than that. Breaking the industrial production figure down a little further, we find that manufacturing fell by 0.9% in the quarter, the first such setback since the second three months of 2009. Year over year, manufacturing output was up 3.2% for the past 12 months.
Taken as a whole, this was a reasonably good report, but in truth, this sector continues to exhibit an uneven overall growth pattern, which is unfortunate given that the nation is this far into an expansion.