The U.S. Commerce Department has just reported solid economic numbers, although neither of the reports--on industrial production or factory usage--will prove to be game changers for either the overall economic prospect or the Federal Reserve Board, as the central bank ponders its next monetary moves.
Specifically, Commerce reported that industrial production at the nation's factories, mines, and utilities rose by a combined 0.4% in June. That was a nice turnaround from the decline of 0.2% in May. The increase, moreover, was the fourth in six months thus far in 2012. All told, manufacturing output rose by 0.7% last month, up from a similar-sized decline in May. This measure has now been up for four of the six months so far this year. At the same time, mining output jumped 0.7% in June, while production at the nation's utilities fell by an outsized 1.9%.
Moreover, capacity utilization rose to 78.9% last month, from a downwardly revised 78.7% in May. Originally, the May usage figure had been estimated at 79.0%. The 78.9% capacity use estimate matched the high water mark for the year, having been reached as well in February and April. In all, usage seems to have plateaued somewhat this year, with the figure generally being in the upper 78% figure. That is a level, which is decent, but certainly not sufficient to put any upward pressures in the raw materials pricing area.
Individually, the production of consumer goods ticked up by 0.1% last month. This category had eased by 0.1% in May. Such pedestrian results should not come as too much of a surprise given that yesterday, the Commerce Department reported that retail sales had fallen by 0.5% in June.
On the other hand, after having edged up by just 0.1% in May, the production of business equipment surged by 1.6% last month. All in all, this was a tolerable issuance, but clearly was not a major turn in sentiment or activity. The nation's economy is continuing to advance in fits and starts, and these two releases should not change that very much. The country is not on a recession course, in our view, but is, instead, pressing forward at a rate of growth--in the 1.5%-2.0% area--that does not figure to be strong enough to bring about a major increase in employment just yet.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.