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After climbing steadily and, at times, strongly through the first five months of this year, industrial production slowed markedly in June, gaining an uninspiring 0.1%. Actually, that token increase was a bit better than the 0.1% decline that had been forecast. However, such nominal improvement paled against May's outsized 1.3% gain.

By definition, the Index of Industrial Production measures the output of such diverse items as consumer goods, business equipment, and construction supplies. It also gauges the production at mines and utilities. In fact, it was the increased output at the nation's utilities--which was fed by the unusually hot weather across the country last month--that provided even the narrow increase achieved. The latest industrial production report was, in fact, just one more example of the recent slowdown in growth in this country.
 
Within the composite index, manufacturing activity fell by 0.4% last month. This subset is probably a better indicator of the overall health of the nation's industrial sector and it was consistent with the recent slower pace of manufacturing activity reported by the Institute for Supply Management earlier this month.
 
Of course, even this unprepossessing industrial production performance represented a marked improvement from the situation a year ago, when the nation was still reporting large output declines. The rate of production did not start to rise until last August and September, and has been climbing, with just one monthly pause,  ever since. The June result was clearly out of line with the strong data reported for much of the past year and suggests that the nation is in the midst of a period of slowing growth.
 
Meanwhile, the nation's factories operated at 74.1% of capacity last month. That level of usage was unchanged from May, but remained well below the 1972-2009 average usage rate of 80.6%.
 
These twin reports are sobering, to say the least, as it has been the industrial sector that has supplied what little punch the economy has exhibited over the last year. The consumer area, which is a far larger component of the economy, has been a notable weak link. If the industrial area is now softening, and if that softness continues, the economy could well stumble in the second half. As it is, we expect growth to moderate into the 2.0%-2.5% range during the third and the fourth quarters.
 
The stock market reacted little to the news as it was released at 9:15 AM (EDT), with the futures retaining their nominal strength at that time. However, after a mixed opening once trading actually began, the averages have turned lower in what may well be no more than some profit taking after a succession of higher closes the past week and a half. The Dow, in fact, fell to a 100-point loss at mid-morning.