US Industrial Production: Supply chains still holding up output – Wells Fargo

Short-handed and waiting for deliveries, manufacturing is not growing as fast as it could be, explained analysts at Wells Fargo. Industrial Production rose 0.8% in May according to data released on Tuesday, but downward revision to prior data “saps the joy from the beat.”

Key Quotes: 

“Overall industrial production notched a 0.8% gain in May, which was slightly better than expectations. However, the fact that April's initially reported gain of 0.7% was revised lower to a pickup of just 0.1% spoils the celebration.”

“The slightly better outturn for May, as well as most of the downward revision, is attributable to manufacturing production which comprises about three-quarters of all industrial output. Manufacturing output rose 0.9% in May after a revision to April's output figure changed a 0.4% gain into a 0.1% decline.”

“Once supply chains normalize, the production outlook remains positive. Excluding motor vehicles and parts, manufacturing output increased 0.5%.”

“Overall capacity utilization rose to 75.2%, but we suspect it could be much higher were it not for a number of challenges. If factories had all the input components they needed and did not have problems finding skilled labor to staff the floor, many factories would be humming along at full tilt.”