June 18, 2024

Industrial production jumped 0.9% in May after having been unchanged in April.  In the past year industrial production has risen 0.4%.  Thus, the manufacturing sector has been essentially unchanged for the past year.

Breaking industrial production down into its three basic categories — manufacturing, mining, and utilities –the Fed reported that manufacturing production rose 0.9% in May after having declined 0.4% in April.  In the past year manufacturing output has risen 0.1%.

In the motor vehicle sector production rose 0.6% in May after having fallen 1.9% in April.  In the past year motor vehicle production has declined 0.5%.

Excluding the motor vehicle sector, manufacturing output rose 0.9% in April after having fallen 0.3% in April.  In the past year it has risen 0.2%.

High tech production rose 0.2% in May after gaining 0.9% in April.   After a rapid increase throughout 2023 high tech production has slowed considerably since the end of last year.  High tech production has risen 8.2% in the past year but has risen at a 4.4% pace in the first five months of this year.  We would suggest that if firms are unable to find an adequate supply of workers, and when they can find them the workers demand significantly higher wages, they will turn to technology in an effort to boost production and satisfy the demand for their products.  Thus, we expect high tech production to continue to climb in the months ahead.

Mining (14%) output  rose 0.3% in May after declining 0.7% in April.   Mining has fallen 0.4% in the past year.

Utilities output rose 1.6% in May after having jumped 4.1% in April as surprisingly hot weather has gripped much of the country.     Over the past year utility output has risen 3.9%.  This component is extremely volatile from month-to-month as the weather fluctuates.

Capacity utilization in the manufacturing sector rose 0.5% in May to 77.1% after having declined 0.4% in April.   It is currently at the 77.4% level that is generally regarded as effective full capacity utilization.

GDP appears to be on track to grow at a 2.8% pace in the second quarter as firms keep hiring at a relatively rapid pace, the unemployment rate has risen only slightly to 4.0%..  However, we expect GDP to slip to 2.0% in the second half of the year as consumer spending finally begins to slow and as the housing sector continues to struggle.

Stephen Slifer

NumberNomics

Charleston, SC