Industrial output fell, but manufacturing output rose slightly in…

Total industrial production fell 0.2 percent in August after increasing by 0.5 percent in July. Over the past year, total industrial output rose by 3.7 percent (see chart 1).

Total industrial energy use fell 0.2 points to 80.0 percent from 80.2 percent in July. August use is above the long-term average (from 1972 to 2021) of 79.6 percent but well below its highs in the 1970s when it was above 88 percent.

Industrial production – about 74 percent of total production – posted a modest 0.1 percent gain for the month, the second straight increase and fourth in the past six months but also the smallest over that period (see first chart). A year ago, industrial production rose 3.3%.

Manufacturing use remained unchanged at 79.6 percent, stable above its long-term average of 78.2 percent. However, it is still well below the 1994-95 high of 84.7 percent.

Mining production accounts for about 16 percent of total industrial output and was unchanged last month after three strong monthly gains (see top of the second chart). Over the past 12 months, mining production has increased by 8.4 percent. Utilities output, usually linked to weather patterns and about 10 percent of total industrial output, fell 2.3 percent, with natural gas rising 0.6 percent but electricity down 2.9 percent. A year ago, utility production was down 1.6 percent.

Among the main sectors of industrial production, energy production (about 27 percent of total production) fell 0.4 percent for the month (see bottom of chart two) with gains in oil and gas well drilling unable to offset the decline in primary energy production and consumer energy products. and converted energy products and commercial energy products. Total energy production is still up 4.7 percent compared to last year. Automobile and parts production (just under 5 percent of total production), one of the industries hardest hit during lockdowns and recovery after lockdown, fell 1.4 percent after an increase of 3.2 percent in July (see bottom second graph). A year ago, production of cars and parts rose 10.2 percent.

Total aggregate vehicles increased to 10.48 million at a seasonally adjusted annual rate. This consists of 10.16 million light vehicles (see chart three) and 0.31 million heavy trucks. Within the light vehicles, the number of light trucks reached 8.38 million, while the number of cars reached 1.78 million. Gatherings rose sharply from the lows but remained below their previous usual range.

The Selected Hi-Tech Industries Index rose 0.3 percent in August (see bottom of the second chart) and was up 5.8 percent from a year ago. High-tech industries account for only 2.1% of total industrial output.

All other industries combined (total excluding energy, high-tech and automobiles; about 66 percent of total industrial output) were unchanged in August (see bottom graph two). This important category is 2.6 percent above August 2021.

Overall, industrial production changed little in August. Manufacturing output gained despite constant labor shortages and turnover, rising costs and material shortages, and logistical and transportation bottlenecks. High price increases, weak consumer sentiment, the Fed’s violent tightening cycle, fallout from Russia’s invasion of Ukraine, and problems related to Covid-19 in China remain significant threats to the economic outlook. Caution is required.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 after more than 25 years researching financial and economic markets on Wall Street. Previously, Bob was Head of Global Equity Strategy for Brown Brothers Harriman, where he developed an equity investment strategy that combines top-down macro analysis with upward fundamentals.

Prior to BBH, Bob was Chief Equity Analyst at State Street Global Markets, Chief Economist at Prudential Equity Group and Chief Economist and Financial Markets Analyst at Citicorp Investment Services. Bob holds an MA in Economics from Fordham University and a BA in Business Administration from Lehigh University.

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