Industrial Production Sees First Gain in Nine Months

by devteam August 14th, 2009 | Share

Markets continue to struggle as the trading session begins but sentiment received a slight boost at 9:15, when the Industrial Production report posted its first monthly gain since October. 

“Aside from a hurricane-related rebound in October 2008, the gain in July marked the first monthly increase since December 2007,” the Federal Reserve said. 

The advance wasn’t meagre either, as production increased 0.5% in July, led by a huge 20% surge in the auto sector. The manufacturing sector got a 1% boost, which is also the first positive print since October, and computers & electronics moved up 0.6%.

Alas, other details weren’t so impressive. Utility output fell 2.4%, electricity production was slashed -2.8%, and natural gas production was cut 0.6%.

Details are just that, however, and analysts were pretty pleased with the overall headline, even though the median forecast was +0.6%.

“This is another sign that the U.S. economy was starting to recover around mid-year,” noted Jennifer Lee at BMO.

Joseph LaVorgna, chief US economist at Deutsche Bank, added: “Historically, industrial production has been a good barometer for dating the end of recessions so if we trend higher from July's reading, the recession likely ended last month.”

However, prior to the release, Ian Shepherdson from HFE warned not to be too optimistic. 

“Given the troubles of the consumer . . . we are inclined to see this as little more than a rebound from the unsustainably steep fall in output after Lehman,” he wrote. “We are happy to see it, and the success of the auto clunkers program will likely boost August and September too, but we are far from convinced that any real momentum is building.”

Elsewhere in the report, the Capacity Utilization rate, which measures slack in the economy, rose for the first time in 9 months by edging up 0.4 points to 68.5%. That’s still 10 points lower than one year ago, but IP has fallen more than 13% since last year, so that’s old news.

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About the Author


Steven A Feinberg (@CPAsteve) of Appletree Business Services LLC, is a PASBA member accountant located in Londonderry, New Hampshire.

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