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May Industrial Production Flat, Manufacturing Dives: Exploring the April Outlier

Courtesy of Mish

For reasons unknown, the economic consensus is still tied to a second quarter recovery thesis.

For example, the Econoday consensus estimate for the manufacturing component of industrial production was +0.2%. Today’s Industrial Production report shows manufacturing fell 0.4%.

Do economists not know about poor auto sales?

Overall, economists expected industrial production to be +0.2%. Instead, production was flat.

Forget about all the strength in the low sample-sized regional reports. Government data are not pointing to strength at all as manufacturing readings in the May industrial production report are a matter of concern.

Industrial production could manage no better than an unchanged reading in May while the manufacturing component fell 0.4 percent. Both are lower than expected with manufacturing below Econoday’s low estimate.

Vehicle production fell sharply in the month, down 2.0 percent in a reminder that consumer spending on autos has been very weak this year. And in a reminder of how weak capital goods data have been, production of business equipment fell 0.7 percent. Hi-tech goods, in yet further confirmation of trouble, were unchanged in the month.

The mining component is a positive in this report, up 1.6 percent for a second straight strong gain, with the utilities component also positive, at plus 0.4 percent.

But manufacturing makes up the vast bulk of the nation’s industrial sector and today’s report makes April’s strength look very isolated. This report is bad news for durables data yet to be released not to mention factory payrolls.

Note that traditional non-NAICS numbers for industrial production may differ marginally from NAICS basis figures.

Industrial Production

The only strong report for the second quarter was last month’s Industrial Production report.

Exploring the April Ramp

Continue reading here…


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