US Industrial Production: Fresh all-time high - Wells Fargo

Analysts at Wells Fargo, point out that with the 0.7% gain, Industrial Production hit a new record high in the US. They explained that Capacity Utilization at 78%, the highest since 2015 shows no need to worry about inflationary pressures.

Key Quotes:

“With contribution from all three industry groups, industrial production increased 0.7 percent in April to reach a fresh all-time high for the first time since 2014.”

“After the recession, it took until 2014 for overall industrial production to get back to its pre-recession peak. “

“What is different about this cycle peak (relative to 2014) is that it comes with a concomitant firming in the manufacturing sector more broadly. Admittedly, manufacturing production is still roughly 5 percent below where it was in December 2007, but the growth rate is picking up on trend.”

“The upshot from our perspective, is that the moderate growth we expect in business spending has a broader base of support and, on that basis, should be less vulnerable to the fickleness of energy prices.”

“Capacity utilization hit 78 percent for the first time since 2015 as slack is gradually drawn out of the system. Not surprisingly, the mining sector is the closest to experiencing capacity constraints at 90.6 percent, followed by utilities at 79.2 percent. As has been the case throughout this expansion, the manufacturing sector has a bit more slack; utilization is just 75.8 percent. By this measure, we are not yet at a point where we need to worry about serious inflationary pressure from the factory sector.”