July Industrial Production Highlights; Factory Output Is Growing at 2X Rate of Overall Economy
2. Annual increases were especially strong in July for business equipment (12.3%), motor vehicles and parts (26.5%) and overall manufacturing (5.0%), especially for durable manufactured goods (9.5%).
3. The Federal Reserve reported motor vehicle assemblies of 11.01 million units in July (seasonally adjusted, annual rate), which was an increase of 29% over last year and the highest number of monthly assemblies in more than five years, going all the way back to June 2007 (see top chart above). Look for strong gains in vehicle sales to continue through the summer and fall, especially since banks are showing a new willingness to make car loans, see Monday's WSJ article "A Green Light for Car Loans" about the recent car-financing surge.
4. July's index for business equipment was just slightly below June's level, but was up by 12.3% compared to a year ago, and the index level for that market group of 104.5, is now slightly above the previous pre-recession peak in February 2008 of 104.4 (see chart above). The transit component of the business equipment group registered the strongest annual gain in July at 28.1%.
MP: Overall, today's Fed report suggests that America's industrial sector continues to grow and remains at the forefront of the economic expansion - the June 2011-June 2012 growth rates in industrial production of 4.7% and 5.6% for factory output are more than twice the rate of growth in the overall economy of 2.2% for real GDP during the same period. Nothing in today's report on industrial output in July would suggest that the U.S. economy is on the front edge of a recession, especially with the strong performance for the production of auto assemblies (now at a five-year high) and business equipment (reached an all-time high in June), and the strong gains for durable goods manufacturing of 9.5%.
Update: From Scott Grannis, "The July industrial production numbers all but rule out the recession that many have been looking for. The economy went through a bit of a soft patch in the first half of this year, but now looks to be picking up. The folks at ECRI have a lot more 'splainin to do."