Industrial production beat expectations

June 18, 2024

Industrial production was up 0.9% in May, beating expectations for a 0.4% rise. Production was flat in March and April. Industrial production is up 0.4% from a year ago, the first annual print in positive territory since December 2023.

Most of the gains in output were on the consumer side, with consumer goods production rising 1.3%, the best monthly reading since July 2023. Gains in appliances and automobiles offset declines in home electronics.

Manufacturing output was up 0.9% after falling in March and April. Manufacturing of motor vehicles and parts rose 0.6% after a sharp decline in April. Production schedules for vehicles have been modified as consumers pulled back from financing auto purchases with higher rates, but all-cash sales have been up for high-income households. Capacity utilization was up to 77.1% in May but is still 1.1 percentage points below its long-run average.

Durable goods manufacturing was up 0.6%. The indices were higher for most categories, with the exception of furniture and related products which were down -2.6%. Consumers are still waiting on the sidelines for interest rates to come down to buy homes; that has dampened demand for furniture to fill the homes. May was the worst reading for the series since November 2022. Nondurable goods manufacturing rose 1.1% after falling in April and March.

Business equipment was tepid at 0.2%. Information processing equipment rose 1.0%, continuing its strength as businesses spend more on generative AI initiatives. Industrial supplies rose 0.5%. The main weakness was in transit equipment, which was down -1.2%. Defense and space equipment rose 1.0% for the second month in a row as military spending continues to flow through the manufacturing sector. The mining index was up 1.4% during the month, the strongest since February. Utilities were up 2.6%.