Updated: 15-May-09 09:37 ET

April Industrial Production

Updated: 15-May-09 09:37 ET

Highlights

• Industrial production declined -0.5% in April following a downwardly revised drop of -1.7% in March (from -1.5%).  The April number will print on the wires as being better than the expected -0.6%, but factoring for the March revision, the data in aggregate are actually just a bit worse than expected. 
• Manufacturing production declined -0.3% and is down -14.5% year-over-year.  The output of mines fell -3.2% and is down -8.6%  year-over-year.  The output of utilities was up 0.4%, but is still down -3.2% year-over-year.
• Total capacity utilization fell to 69.1% from 69.4% in March and is at the lowest point since records began in 1967.  Similarly, manufacturing capacity utilization dropped to 65.7% from 65.8% and is at its lowest level since records began in 1948.

Key Factors

• The excess capacity will serve to keep any pricing pressures in check and goes to show how quickly business has ramped down its production capabilities to deal with the drop in aggregate demand.
• While not as bad as prior reports, the April industrial production report still doesn't offer good economic news.

Big Picture

• The outlook for industrial production has worsened.  Production held up surprisingly well through most of 2008 due in part to strong exports.  Exports grew at a 7.0% annual rate in 2005, 9.1% in 2006, 8.4% in 2007, and at an annual average rate of 7.8% through the first three quarters of 2008.  A major factor in this boom was a continually weakening dollar.  Now, the dollar has strengthened and global economies are in recession.  This will undermine export growth and take away a major support for US industrial production.  US companies will also be impacted by the weak economic outlook.  Production is therefore likely to trend lower.