Summary: US output increases for fourth consecutive month; gain less than expected; August historically a quiet month; capacity utilisation increases slightly, still at depressed levels.
The Federal Reserve’s industrial production (IP) index measures real output from manufacturing, mining, electricity and gas company facilities located in the United States. These sectors are thought to be sensitive to consumer demand and so some leading indicators of GDP use industrial production figures as a component.
Production began recovering in May and subsequent months after collapsing through March and April.
US industrial production expanded by 0.4% on a seasonally adjusted basis in August, the fourth consecutive monthly increase. The result was less than the 1.0% expansion which had been expected and a fraction of July’s 3.5% after it was revised up from 3.0%. However, on an annual basis, the contraction rate increased from July’s revised figure of -7.4% to -7.7%.
“August is seasonally a quiet production month given retooling in the auto sector, while Boeing remains closed,” said Westpac senior economist Elliot Clarke.
US Treasury bond yields were largely unresponsive. By the end of the day; the US 2-year Treasury yield had slipped 1bp to 0.14%, the 10-year yield remained unchanged at 0.68% while the 30-year yield finished 1bp higher at 1.43%.
The same report includes US capacity utilisation figures which are generally accepted as an indicator of future investment expenditure and/or inflationary pressures. Capacity usage had hit a high for this business cycle in early 2019 before it began a downtrend which ended with April’s multi-decade low of 64.2%. August’s reading extended on previous gains as the capacity utilisation rate increased from July’s revised figure of 71.1% to 71.4%.