Industrial Production: A Healthy Sideways

If Industrial Production is supposed to be the cyclical tie breaker, we are going into overtime.

Apr 16, 2024

Both Durables and Nondurables happy this month…

The latest capacity utilization metrics ticked higher sequentially but are slightly lower than 4Q23 and a full point below 3Q23, so this release goes in the “neutral” column for cyclical handicapping and “FOMC watch.”
Using Industrial Production alone, the 1Q24 period marked a small decline YoY, but Manufacturing firmed up and grew YoY for March.
Manufacturing ticked slightly higher in Cap Ute with both Durables and Nondurables higher but with diverging trends within the industry groups.
Durables was supported by Motor Vehicles with more than a 2-point jump from Feb and up more than 4 points from Jan.

The top down story line from the Industrial Production side of the economy did not move the needle much this month on FOMC themes with eyes still more focused on the consumer sector and jobs and inflation with maybe a side trip to Middle East Armageddon scenarios that flow into oil price pain.

As we cover each month, we like capacity utilization metrics (“cap ute”) since it is an Industrial Production sibling (first cousin?) and more intuitively translates into pricing power. March saw very slight upticks in Total Cap Ute for Manufacturing and for both Durables and Nondurables. That continues some soft signals that manufacturing may be firming up after such a good run for the consumer. Reinvestment may keep the ball rolling, and the last Durables release also offered more hints (see Durable Goods: A Small Boost for Manufacturing Sentiment 3-26-24).

The above chart updates some of the larger, more important manufacturing lines we like to track each month in Durables and Nondurables. We see 3 of 5 in Durables tick down and 2 higher with the biggest move from Motor Vehicles with the declines more muted. Aerospace has been under somewhat of a cloud of late and Defense could turn on some more activity in Washington with the world heating up. Nondurables saw the two largest sectors split the vote with Chemicals higher and Food, Beverage and Tobacco lower.

Footnotes & Flashbacks: State of Yields 4-14-24

Footnotes & Flashbacks: Asset Returns 4-14-24

Consumer Sentiment: Do You Think Scary Thoughts 4-12-24

CPI March 2024: The Steeplechase Effect 4-10-24

Credit Markets Across the Decades 4-8-24

Credit Cycles: Historical Lightning Round 4-8-24

Payroll March 2024: Payroll Spike Brings a Political Theme Shift 4-6-24

JOLTS Feb 2024: Steady and Sideways 4-2-24

PCE Prices, Personal Income & Outlays: Sideways Tone 3-29-24

4Q23: Final Cut, Moving Parts 3-28-23

Durable Goods: A Small Boost for Manufacturing Sentiment 3-26-24

Industrial Production: Capacity Utilization Shows Manufacturing Edging Higher 3-15-24