Industrial Production Shows Signs of Softening

As expected, industrial production rose +.1% MoM in September, and capacity utilization remained steady at 82.1%. This followed a revision lower in August industrial production to unchanged from the +.2% increase originally reported. Strikes and reduced consumer demand for new vehicles restrained auto production which fell -3.3%MoM. Excluding autos, industrial production rose +.2% MoM in September. Utility demand was a slight negative (-.1% MoM) in September after jumping +4.6% the prior month on unusually large air-conditioning demand due to the record high temps.

The only categories showing declines last month were consumer goods at -.3% MoM and construction materials at -.2% MoM, both sectors of the economy Fed Chairman Bernanke commented that he has concerns about in his speech last night.

Capacity utilization saw declines in most categories, with computers and semiconductors displaying the largest drops. Semiconductors have fallen 10 points in the last year to 75%. The highest utilization is in mining, which ticked up to 90.6%. Mining output, which includes oil production, rose +.2% MoM. Total capacity utilization remains above its long-term average.

Compared to a year ago, industrial production has risen +1.9% YoY with ex-vehicle industrial production rising +2.2% YoY. Motor vehicle production has declined -2.2% YoY, followed closely by machinery at -1.8% YoY. Strength has been seen in utility demand, rising +6.4% YoY and computers and electronics at +9.1% YoY. General manufacturing has grown by +1.6% YoY, but with orders for new goods slipping, this source of growth may be under threat in the fourth quarter. New factory orders fell the most in seven months in August.