Industrial Production Mixed – Autos Still the Canary in the Coal Mine?
Total industrial production was up by .2% month-over-month in July and continues to grow at an annualized rate of 5.2% through Q2. July showed a 2.2% year-over-year growth rate as well. But, the bigger stories will come in the big movers (both positive and negative).
Most importantly, automotive production was off by 3.2% month-over-month and 4% year-over-year in July. Through Q2, automotive was slipping at a 1% annualized rate. That’s still a fairly bearish outlook for automotive, and responsible for some of the sluggishness we see in the manufacturing sector.
[As an aside, we see some strong manufacturing and production figures coming out of Japan – primarily on the back of strong automotive exports to multiple parts of the world. So, on a global basis, it appears that automotive demand is still good.]
Year-over-year in July:
“Market sectors” that were weak in July year-over-year include durable goods (-1.5%), appliances (-.4%), clothing (-7%) and energy (-.7%).
Ending on a positive, the areas of growth include consumer goods (+.3%), home electronics (+1.7%), nondurables (+.8%), chemical products (+.4%), and paper products (+1.4%).
Looking at “industry sectors”, we saw strength in manufacturing (+1.3%), wood products (+6.2%), fabricated metal products (+2.2%), machinery (+2.7%), computer products (+4%), non-durable manufacturing (+2.3%), food and beverage (+2.2%), petroleum products (+5.5%), and chemicals (+3.7%).
Weakness in industry sectors came from motor vehicles and parts (-5%), apparel (-6.5%), textile mills (-2.5%), and aerospace (-2.5%).
Given these industrial production sector performances in July, it’s easy to see why there are mixed views on how well the economy is doing. Overall, the industrial sector is doing well. But, in some of the most publicized sectors (like automotive and aerospace), we see some hints of weakness.
If these pockets of weakness continue in the big sectors, it will eventually create a problem for the overall economy.