 | Industrial Production Rose 0.4% in March |
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| Posted Under: Data Watch • Industrial Production - Cap Utilization |
Implications: The Plow Horse economy continues. Industrial production rose 0.4% (+0.5% including revisions to prior months) and now stands at the highest level since March of 2008, very close to an all-time record high. However, on net, all the gain in March was due to higher output at utilities, the result of the relatively cold weather throughout much of the country. Manufacturing production declined 0.2% (unchanged including revisions to prior months) led by a 2.7% drop in primary metals. Auto production was up 2.9%. Next month, expect the reverse of what we had this month, with a rebound in manufacturing but a drop in utilities. The best way to check today's report is to look at the underlying trend, which is still upward. Overall production is up 3.5% in the past year while manufacturing is up 3%. The autos sector has led the manufacturing gains, up 10.2% in the past year, but even manufacturing outside the auto sector has done OK, up 1.9% in the past year. We expect the gap between those two growth rates to narrow considerably in 2013, with slower growth (but still growth!) in autos and faster growth elsewhere in manufacturing. Capacity utilization rose to 78.5% in March, close to the average of 79.0% in the past 20 years, and the highest percent of capacity since 2008. Continued gains in production will push capacity use higher, which means companies will have an increasing incentive to build out plant and equipment. Meanwhile, corporate profits and cash on the balance sheet are at record highs, showing they have the ability to make these investments. In other news yesterday, the Empire State index, a measure of manufacturing sentiment in New York, declined to +3.0 in April from +7.0 in March. However, the index still suggests growth.
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