Industrial Production: Sharp Revisions Buoy Trend

Bottom Line: While the 3rd Quarter started slower than expected there were net positive revisions to 2nd Quarter industrial production growth that mostly offset the July miss. Utility production has been very volatile, mostly to the downside -- but that will likely rebound sharply this month amid a heat wave on the US East Coast. Manufacturing has seen a modest deceleration in the last few months as auto sales have cooled but remain stronger year-over-year. The core trend excluding high-tech and autos remains steady at a 2% annualized pace of growth, despite some negative volatility in the last few months that bears watching. Industrial Production ROSE by 0.11% in July, compared with market expectations for an increase of 0.3%. Moreover, the prior month was revised from 0.6% up to 1.0%. Output is now 4.2% ABOVE its year ago level. In July, Mining Output FELL by 0.2%, and is now 12.9% ABOVE its year ago level. Utility Generation FELL by 0.5% and is now 2.4% ABOVE its year ago level. Manufacturing Output ROSE by 0.3% and is now 2.9% ABOVE its year ago level. Output in high-tech industries rose by 0.8%. Meanwhile, output in the motor vehicle industry rose by 1.0%. Excluding both the high-tech and motor vehicles industries, industrial output climbed by 0.2%. Capacity Utilization FELL to 78.1%, compared with market expectations for a higher increase to 78.2%. Moreover, the prior month was revised from 78.0% to 78.1%. The capacity utilization rate is now 2.0 percentage points above its year ago level and 1.9 percentage points below its long-run (1972–2015) average.