Industrial Production Edges Up; Capacity Utilization Level Eases
April 28, 2011
WASHINGTON -- Industrial production rose by 0.1% in July while capacity utilization dropped by 0.2%, the Federal Reserve Board said, numbers that suggest continued moderation in the economy. A 1.8% plunge in utility output -- caused as consumers on the East Coast shut off their air conditioning during unseasonably cool weather -- wasn't enough to offset a 4.3% jump in motor-vehicle production. While sales of light vehicles to consumers are weak, the demand for fleet vehicles is high, and likely to stay that way for the second half of the year, said Christa Priddy of Macroeconomic Advisers in St. Louis. The Federal Reserve Board's report on industrial production, the Philadelphia Federal Reserve's Business Outlook Survey and the Labor Department's report on jobless claims are available. The demand is ``out there,'' he said. ``It's because inventories are a touch lean, and also, it's because there's the possibility of a strike later in the year.'' In most other areas, industrial production was flat, in line with predictions. Total industrial production was 3.8% above the July 2010 level. Factories, utilities and mines operated at 83.2% of capacity last month, down slightly from June's 83.4%. Capacity of 85% or higher is what analysts watch out for as a sign of an overheating economy. ``Capacity is growing at a 27-year high,'' said Cheryll Broussard, a senior economist at Merrill Lynch & Co.. She notes that it's outpacing demand, which is ``going to keep the cap on the utilization rate.'' Stocks and bonds fell on the stronger-than-expected industrial-production statistics but rallied with the Federal Reserve Bank of Philadelphia's report of a tapering off of manufacturing activity in the region. The new reports are ``consistent with a moderation in economic activity in the first part of the year,'' Mr. Priddy said, maintaining they were nothing to panic over. ``Remember, these numbers are volatile; they're constructed in ways that only God and Merlin understand.'' Separately, the Labor Department said new claims for unemployment benefits rose 5,000 last week to 321,000. The four-week moving average, often considered a better indicator of labor trends than the one-week figure, dropped to 313,000 from 325,000 and was at its lowest since May 1989. Some analysts said the figures were affected by the department's difficulty in adjusting them for vacation periods. Both the industrial-production report and the jobless-claims report are adjusted for seasonal variations.
