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Just when it seemed as though the economy was strengthening across a fairly broad front, a report has been issued detailing that July's industrial production had shown no month-to-month change. This flat reading compared with expectations for a gain of 0.3%. Also, June's estimated increase of 0.3% was pared back to a revised estimate of 0.2%.

At the same time, capacity utilization eased slightly last month, with the average factory use rate edging down to 77.6% of capacity. In June, the usage average was 77.7%. Expectations for July had been for capacity use to have risen to 77.9%. Although these rates of change, or in the case of industrial output, no change, were not game changers, they do point up the fact that the economic up cycle continues to be a three steps forward, two steps backward affair.

Breaking this report from the Commerce Department down to its component parts, we learned that industrial production showed no change for the second time in three months in July. For the past year, overall output has climbed by 1.4%. As to specific groups, manufacturing, by far the largest component within the aggregate category, eased by 0.1% in July. At the same time, mining activity jumped by 2.1%, while utilities output fell by the exact same amount. The sharp drop in utilities was not all that surprising, given that utility costs declined last month, according to data issued earlier this morning by the Labor Department on consumer prices. This might just reflect somewhat cooler temperatures and, therefore, a reduction in air conditioning usage and, therefore, costs.

As to factory use, as noted, it declined from 77.7% in June to 77.6% last month. This rate has actually eased back steadily since February and March, which had registered readings of 78.1% and 78.2%, respectively. Breaking this report down, we find that manufacturing use eased back from 75.9% in June to 75.8% last month, while mining utilization rose from 88.0% to 89.5%, and utilities use fell from 77.8% of capacity to 76.2%.

Over the past year, manufacturing usage has increased by 1.5%; mining activity has risen by a strong 4.1%; and factory use at the utilities level, has risen by 1.1%. Taken as a whole, this was a somewhat disappointing report, but not a major event as far as our outlook for generally improving economic activity during the second half in concerned.

At the time of this article's writing, the author did not have positions in any of the companies mentioned.