June output falls for the second month in a row

Total industrial output fell 0.2 percent in June after being flat in May and rose 0.8 percent in April (see first chart). Over the past year, total industrial production has grown by 4.2 percent, and at an annualized rate by 2.5 percent over the past three months.

Overall industrial capacity utilization fell 0.3 points to 80.0 percent from 80.3 percent in May, but remains above the long-term (1972 to 2021) average of 79.6 percent.

Manufacturing output, accounting for about 74 percent of total output, declined for the second consecutive time, falling 0.5 percent on the month (see first chart). Compared to last year, output increased by 4.2 percent, but over the past three months it has fallen by 1.7 percent year on year.

Manufacturing utilization fell 0.5 points to 79.3 percent, but remains above its long-term average of 78.2 percent. However, it remains well below the 1994-1995 high of 84.7 percent.

Mining accounts for about 16 percent of total industrial output and increased significantly by 1.7 percent last month after rising 1.2 percent in May (see top of chart two). Over the past 12 months, mining has grown by 8.2 percent. Utility production, which is typically weather-related and accounts for about 10 percent of total industrial output, fell 1.4 percent, with natural gas up 2.2 percent and electricity up 2.0 percent. Compared to last year, the output of public services increased by 1.4 percent.

Among key manufacturing segments, energy production (about 27 percent of total output) rose 0.4 percent mom (see bottom of Chart 2) driven by an increase in oil and gas drilling and primary energy production but a decline in consumer energy products , commercial sector. energy products and converted energy products. Total energy production increased by 5.2 percent compared to last year.

Automotive and parts manufacturing (just under 5 percent of total output), one of the hardest hit industries during lockdowns and post-lockdown recovery, continues to struggle with semiconductor chip shortages. Automotive and parts production fell 1.5% in June after falling 1.9% in May (see bottom of chart 2). Compared to last year, the production of vehicles and spare parts increased by 12.5%.

The total number of complete vehicles fell to a seasonally adjusted 10.31 million year on year. This includes 10.01 million light vehicles (see third chart) and 0.29 million heavy trucks. Among passenger cars, light trucks accounted for 8.26 million and cars accounted for 1.75 million. Gatherings have risen sharply from lows but remain below pre-pandemic levels.

The selected high-tech industry index added 0.2% in June (see the bottom of the second chart) and is up 1.8% year-over-year. High-tech industries account for only 2.1% of all industrial production.

All other sectors combined (total, excluding energy, high-tech and motor transport; about 66 percent of total industrial output) fell 0.4 percent in June (see bottom of Chart 2). This important category is 3.1% higher than in June 2021.

Overall, industrial output declined in June, resulting in weak performance. Manufacturing output has fallen for the second month in a row due to a widespread economic slowdown. Persistent labor shortages and turnover, rising costs and shortages of materials, and bottlenecks in logistics and transportation continue to be challenges for the industrial sector. In addition, the intensifying Fed tightening cycle, the fallout from the Russian invasion of Ukraine, and Covid-19-related concerns in China remain major threats to the economic outlook. The caution is justified.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 after over 25 years of economic and financial market research on Wall Street. Bob previously led the Global Equity Strategy division of Brown Brothers Harriman, where he developed an equity investment strategy that combines top-down macro analysis with bottom-up fundamentals.

Prior to joining BBH, Bob was Senior Equity Strategist at State Street Global Markets, Senior Economic Strategist at Prudential Equity Group, and Senior Economist and Financial Markets Analyst at Citicorp Investment Services. Bob holds an MA in Economics from Fordham University and a BA in Business from Lehigh University.

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