Capacity Utilization and Manufacturing Perk Up
This ranks as one of the best monthly economic data points. Capacity utilization and industrial production showed some signs of life in December as total industry capacity utilization continued to move higher to a reading of 78.8. Industrial production also ticked higher, but the rate of change in both readings remains alarmingly weak. Overall, the TCU reading is an improvement off last month’s reading of 78.7 though it’s roughly flat on a year over year basis (see figure 1 below).
Here’s econoday with a bit more detail:
“Manufacturing in December was much better than suggested by the headline number for industrial production as utilities output was down sharply. Industrial production in December advanced 0.3 percent, following a 1.0 percent rebound in November (originally up 1.1 percent). Analysts projected a 0.2 percent increase for December.
In December, the manufacturing component jumped 0.8 percent, following an increase of 1.3 percent the prior month. Market expectations were for a 0.4 percent boost. Motor vehicle production was strong with a 2.6 percent rise after a 5.8 percent boost in November. But other industries were strong. Excluding motor vehicles, manufacturing output increased 0.7 percent after a 0.9 percent rebound in November.”
(Figure 1 – total capacity utilization via Orcam)
It’s not all roses though. The chart above shows a clear weakness in the economy that remains. Historically TCU has run at about 81. That’s the average. So we’re still operating well below capacity and far off cyclical highs. And the news from industrial production shows that the trend isn’t getting stronger. It’s weakening. The year over year rate of change in industrial production is at a new post-recession low of 2.2%. That’s still positive, but it’s not consistent with an economy that is booming by any means. It’s a muddle through environment….
(Figure 2 – Industrial production via Orcam)
Cullen Roche
Mr. Roche is the Founder of Orcam Financial Group, LLC. Orcam is a financial services firm offering research, private advisory, institutional consulting and educational services.
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6 Comments
Some slight improvement. It’s still very weak data though.
Doug Short has a nice series of charts worth looking at that also includes the industrial production.
Similar conclusions and he also confirms Orcam’s “no recession yet”
http://advisorperspectives.com/dshort/updates/Big-Four-Economic-Indicators.php
Yet another case for stimulus spending to pull the slack in the economy.
And there are those who say the economy is slow due to “supply problems”, yea, right…
A lot of companies have payed out an extra dividend in order to avoid the higher capital gains tax becoming effective january 1st. And people have spend that money to make sure the IRS doesn’t get its hand on that money. So, I am not surprised to see manufacturing tick up slightly. But that extra demand will be lacking in 2013.
tangentially related, Cullen you have to read this paper:
http://www.asce.org/uploadedFiles/Infrastructure/Failure_to_Act/SCE44%20summary_report_FINAL-hires.pdf
I would imagine this is due to Sandy. Infrastructure of the type like electrical transformers, light fixtures and poles, electrical switch gear, a lot of industrial stuff that is still made here in the states.