June Industrial Production fell .4% and is the 17th month of decline in the last 18. It was .2% better than expected but May was revised down .1% so overall it was about in line. Capacity Utilization fell to 68% from 68.2% in May but was a touch more than the consensus of 67.9%. It’s at a record low dating back to 1967 for the 5th straight month and provides fodder for those who are relying on the large output gap in keeping inflation pressures at bay. Again, the drop in IP was led by the auto sector which saw a drop of 2.6% m/o/m and is now down 42% y/o/y. It’s this astonishing decline that should at some point reverse and will thus lead to some support for GDP growth when it does, hopefully in the 2nd half as many expect. Production also fell in machinery, mining and computer, electronics. Utility output bounced for the 1st time since January.

Category: MacroNotes

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