Manufacturing production increased 0.1% in June, the Federal Reserve reported today, underperforming analyst expectations for an increase of 0.3% or more.
Industrial production showed a similar modest improvement, up 0.2% for the month.
For the second quarter, industrial production advanced at an annual rate of 5.5% while manufacturing output showed a healthy 6.7% rate of improvement. Overall capacity utilization stalled at 79.1% while manufacturing's operating rate fell 0.1% to 77.1% in June, compared to a long-term average of 78.7%.
Noting the volatility in monthly data, Don Norman, senior economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), pointed out:
“For the second quarter as a whole, production of durable goods increased at an annual rate of 8.8%. The increase was broad-based, with the indexes for nonmetallic minerals, primary metals, fabricated metals products, aerospace and transportation equipment, and the furniture industries increasing by 1.0% or more. In contrast, production of nondurable goods declined by 0.3%. This decrease was partly the result of a disruption of a major refinery that led to petroleum and coal products output falling by 2.7%.”
Mining output was the big winner for the month, increasing 18.8% in June. In contrast, utilities fell at an annual rate of 21.4%.
Total industrial production stood at 103.9% of its 2007 base and was up 4.3% compared to June 2013. Manufacturing output compared to a year ago was 3.5% higher.
Chad Moutray, chief economist for the NAM, said the June numbers, though modest, continued to show expansion in the manufacturing sector:
“[M]anufacturers continued to expand output, with the sector recovering from softness earlier in the year. Yet, growth slowed in June, and we would like to see improvements coming from a broader base of the manufacturing sector. In general, manufacturers are cautiously upbeat about production in the second half of this year, but for those projections to materialize, we need to see stronger growth in the U.S. and globally.”
But economist Alan Tonelson said the June industrial production figures showed momentum in U.S. manufacturing had virtually dried up:
“This morning’s Federal Reserve industrial production figures showed that inflation-adjusted U.S. manufacturing output rose by 0.11% in June. May’s 0.65% on-month gain was revised down to 0.48% on-month, and April’s growth was revised down from 0.34% to 0.29%.
“These data reveal a dramatic slowdown from the real growth registered by domestic industry since its rebound from a slump earlier this year partly resulting from harsh weather. In February, real manufacturing output jumped by 1.30% on month in real terms after falling by 1.03% in January. Strong after-inflation manufacturing growth continued in March with a 0.91% improvement registered. But subsequent increases have been much slower since.”
