• Home ::
• Fundamental ::
• Analysis Reports ::
• Daily Global Commentary

• Send
• Print
• Add To
• Rss

Daily Global Commentary

45583748-475b-4c98-936d-8af1471e2ca1

0

0

Industrial Production: Details Reveal Significantly Soft Factory Conditions

Sun, Aug 17 2008, 21:33 GMT
by Asha Bangalore

Northern Trust

Industrial Production: Details Reveal Significantly Soft Factory Conditions

Industrial production increased 0.2% in July following a revised 0.4% gain in the prior month. These headline readings mask the soft production situation at the nation’s factories. On a year-to-year basis, industrial production dropped 0.2%, the first drop in factory production since June 2003. Output of utilities fell 1.8% and that of mining (mainly related to oil drilling) moved up 0.95%. The operating rate of the factory sector edged up one notch to 79.9% in July.

Factory production rose 0.4% in July compared with a 0.1% increase in the prior month. This headline is impressive given the weak economic backdrop but combing through the details reveals a different picture. On a year-to-year basis, factory production has dropped for the fourth straight month and the pace of decline is accelerating.

Auto production rose 3.6% in July after a 4.8% increase in June, but on a year-to-year it fell 10.4%. At the same time, inventories of autos are climbing while sales have posted a sharp drop. The upward trend of auto inventories suggests that auto production is most likely to fall in the near term.

High tech production advanced 0.3% in July, after a 0.5% increase in the prior month. Excluding autos and high tech, factory production fell 1.7% from a year ago (see chart 4), marking the fourth consecutive monthly decline. These details paint a different picture of the factory sector compared with the headlines of the report.

Small Improvement in Consumer Sentiment

The University of Michigan Consumer Sentiment Index moved up slightly to 61.7 in August from 61.2 in June. The Current Economic Conditions Index edged down to 69.3 from 73.1, while the Expectations Index rose to 56.8 from 53.5 in July. The recent drop in energy prices is seen to have played a role in the improvement of consumer optimism but the level of the index remains close to lows last seen in the 1980 recession.

• Download Full Daily Global Commentary

Published on  Sun, Aug 17 2008, 21:37 GMT