United States
Industrial production in June rose by .4% m/o/m, one tenth more than expected but the .2% increase in the manufacturing component was as expected. It was the mining component that was the catalyst for the headline surprise as rig counts continue to rise. Mining rose 1.6% m/o/m and 9.9% y/o/y. Utility output was flat m/o/m. Within manufacturing, motor vehicle/parts were up by .7% but are up just 1% y/o/y as the industry digests excess inventories and slowing sales. The production of computers/electronics fell for the 2nd month but are up 4.9% y/o/y. The production of machinery equipment rose .6% m/o/m and is up 1.7% y/o/y. Manufacturing production has basically gone nowhere over the past 3 years and remains well below the 2007 peak. See chart:
Capacity utilization at 76.6% still remains well below the long term average of about 80% and this in the 9th year of this expansion. Auto’s in particular saw capacity utilization was 82% vs 81.5% in May and 83.3% in April. This low overall level of the extent in which capacity is being utilized helps to partially explain why capital spending remains mediocre.
Bottom line, the rebound in oil drilling was really the only standout in June as manufacturing production was up just 1.2% y/o/y. The latter is consistent with a below 2% type economy that we are now in. As stated earlier, expect another cut to Q2 GDP after the weak retail sales data. Prior to this, the Atlanta Fed is at 2.6%.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.