Additional positive reports were issued within the past hour on the industrial front. Specifically, some 45 minutes after the Labor Department had reported that the Consumer Price Index registered an unchanged reading in July, two-tenths of a percentage point less than the 0.2% rise forecast, the Commerce Department announced that industrial production had ticked up by 0.6% last month.
The increase was exactly on the consensus forecast of a 0.6% gain. However, the June report, initially estimated to have been a reasonably firm rise of 0.4%, was, instead, pared back to just a nominal upward change of 0.1%. The latest rise, meantime, was the best showing since April, when the index had been up by 0.8%.
Breaking the report down, we find that manufacturing activity, by far the largest component in the mix, was up by 0.5% last month, matching the June gain. Previously, the June manufacturing increase had been estimated at 0.7%. At the same time, two smaller components, mining and utilities, saw more formidable gains of 1.2% and 1.3%, respectively. In the last 12 months, manufacturing is up 5.0%; mining activity is ahead 6.0%, while utilities use is off by 2.4%. Overall, the industrial production index has increased by 4.4% over the past year, a modest uptick.
As to some other components, consumer products production was ahead 0.6% last month, while the output of business equipment was off by 0.1%. Construction also fell, losing 0.5%, but materials production was up by 1.0%.
As to the other part of this overall industrial snapshot, capacity utilization rose to 79.3% last month, also in line with expectations, from an unrevised 78.9% in June. Capacity utilization had been stuck at 78.9% for three months. Indeed, progress has been slow all along this year, as usage has been relatively flat in 2012 so far. Just after the trough of the recession, in July of 2009, factory use had been down to 66.8%. A year ago, it was at 77.0%. So, there has been some notable progress over the past year, but little of it has come in 2012.
Finally, capacity use in manufacturing was at 77.8 last month, which was off slightly from where it had been in February, and barely changed in more recent months. However, it was up at 90.4% in mining and has risen above 75% in the utilities area.
Taken as a whole, the industrial production and capacity utilization reports were decent, but not game changers by any means. Along with the benign inflation readings posted both yesterday and this morning, this latest data suggest that the Federal Reserve has additional latitude to take curative action at its mid-September FOMC meeting. Now, we will see if the lead bank opts to do just that.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.