Industrial Production Increased 0.3% In September, Minimal Impact From Florence

Industrial Production Increased 0.3% in September. Hurricane Florence had an estimated effect of less than 0.1%.

The Fed released Industrial Production and Capacity Utilization numbers for September this morning.

Industrial production increased 0.3 percent in September, about the same rate of change as in the previous two months. Output growth in September was held down slightly by Hurricane Florence, with an estimated effect of less than 0.1 percentage point.

For the third quarter as a whole, total industrial production advanced at an annual rate of 3.3 percent. In September, manufacturing output moved up 0.2 percent for its fourth consecutive monthly increase, while the output of utilities was unchanged. The index for mining increased 0.5 percent and has moved up in each of the past eight months. At 108.5 percent of its 2012 average, total industrial production was 5.1 percent higher in September than it was a year earlier. Capacity utilization for the industrial sector was unchanged at 78.1 percent, a rate that is 1.7 percentage points below its long-run (1972–2017) average.

Capacity Utilization

Econoday Comments

Focusing on manufacturing which makes up nearly 3/4 of all industrial production, this yearly rate is up 3.5 percent. This looks like a modest rate of growth but this report tracks volumes and when adding in the rate of inflation, growth is closer to 6 percent which is strong.

Motor vehicles have been a central strength, jumping 1.7 percent in September for a 7.0 percent on-year rate. Selected hi-tech has also been strong, up 0.6 percent in the month for a yearly 6.9 percent gain.

The manufacturing component of this report, even when adding in inflation, has yet to show the double-digit strength of factory orders and shipments nor even a shadow of the strength of small sample surveys like Empire State and ISM. Yet the gains for vehicles, hi-tech and especially business equipment are pluses that do point to positive momentum. And year-on-year growth for overall industrial production is very strong at 5.1 percent. Watch tomorrow for the Philly Fed’s October update on manufacturing.