Financial Controls: USA Industrial Production at 27-Month High! (Charts) *Capacity utilization increases*

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Federal Reserve Statistical Release: Industrial Production and Capacity Utilization

USA Industrial Production at 27-Month High!

Official Statement by the Federal Reserve Industrial production increased 0.4 percent in November after a decline of 0.2 percent in October. The rate of change for industrial production was revised down in October but up in September; the net effect of the revisions from June to October left the level of industrial production in October about the same as was previously reported. In the manufacturing sector, output advanced 0.3 percent in November with gains in both durables and nondurables. The gains among durable goods industries were particularly broad-based; only the production of motor vehicles and parts decreased substantially. Excluding motor vehicles and parts, overall factory output advanced 0.7 percent. The output of mines edged lower, but the output of utilities moved up 1.9 percent as the return of more seasonal temperatures boosted the demand for heating. At 93.9 percent of its 2007 average, total industrial production in November was 5.4 percent above its level a year earlier.

Cycle History The current Industrial Production Index (preliminary) of 93.9 is up +8.4 and +9.8% from the Great Recession cyclical bottom of 85.5 in June 2009. The Index is down -6.8 and -6.8% from the pre-Great Recession cyclical peak of 100.7 in September 2007. Therefore, the current Index is approximately mid-range, a little closer to the peak, between the cyclical peak and trough.

Trend The current Industrial Production Index (preliminary) of 93.9 is a post-Great Recession cyclical peak and 27-month high, up +.42 from October, MoM, and up a strong +5.4% from November 2009, YoY. The Index has increased 15 of the last 17 months, since the cyclical trough in June 2009. The current Index is above the 12-month moving average of 92.2 and has been for 14 consecutive months. The current Index is above the 24-month moving average of 90.0 and has been for 8 consecutive months. The current Index is above the 36-month moving average of 92.7 and has been for 5 consecutive months. The 12-month moving average is ascending sharply after a cyclical trough of 87.7 in December 2009. The 24-month moving average has leveled off and continues at a cyclical low. The 36-month moving average continues descending. (The 12-month, 24-month, and 36-month moving averages charts are not shown on this page).

Industrial Production Index (Chart) Below is a chart of the latest 39 months (3+ years) of the Industrial Production Index from the pre-Great Recession cyclical peak of 100.7 in September 2007 through the latest month reported, November 2010 of 93.9. As can be seen, the Index bottomed in July 2009 at 85.5 and has generally ascended through November 2010 to a post-Great Recession cyclical peak and 27-month high.

Commentary The Federal Reserve revised the past few months of data but the changes were immaterial and to the upside. The November Industrial Production Index of 93.9 is a strong increase, a 27-month high, and a post-Great Recession cyclical peak, which is very encouraging. The Index has remained above 93 since July 2010 and 5 consecutive months (93.4, 93.6, 93.7, 93.5, and 93.9). Previously, the Index had been below 93 for 20 consecutive months (November 2008 through June 2010).

USA Capacity Utilization Rate Increases in November

Official Statement by the Federal Reserve The capacity utilization rate for total industry rose to 75.2 percent, a rate 5.4 percentage points below its average from 1972 to 2009.

Cycle History The current Capacity Utilization Rate (preliminary) of 75.2 is up +7.0 and +10.3% from the Great Recession cyclical bottom of 68.2 in June 2009. The Index is down -6.5 and -7.9% from the pre-Great Recession cyclical peak of 81.7 in April 2007. Therefore, the current Index is approximately mid-range between cyclical peak and trough.

Trend The current Capacity Utilization Rate (preliminary) of 75.2 is a post-Great Recession cyclical peak and 25-month high, up +0.39% from October, MoM, and up a strong +5.7% from November 2009, YoY. The Rate has increased or held steady 16 of the last 17 months, since the cyclical trough in June 2009. The current Rate is above the 12-month moving average of 73.8 and has been for 14 consecutive months. The current Rate is above the 24-month moving average of 72.0 and has been for 8 consecutive months. The current Rate is above the 36-month moving average of 74.2 and has been for 4 consecutive months. The 12-month moving average is ascending sharply after a cyclical trough of 70.0 in December 2009. The 24-month moving average has leveled off and has been at a cyclical low of 71.9 and 72.0 in August, September, October, and November 2010. The 36-month moving average continues descending. (The 12-month, 24-month, and 36-month moving averages charts are not shown on this page).

Capacity Utilization Rate (Chart) Below is a chart of the latest 44 months (3+ years) of the Capacity Utilization Rate from the pre-Great Recession cyclical peak of 81.7 in April 2007 through the latest month reported, November 2010 of 75.2. As can be seen, the Rate bottomed in June 2009 at 68.2 and has generally ascended through November 2010 to a post-Great Recession peak. and 25-month high.

Commentary The commentary is basically the same as the Industrial Production Index above. The Federal Reserve revised the past few months of data but the changes were immaterial and to the upside. The November Capacity Utilization Rate of 75.2 is a good increase, a 25-month high, and a post-Great Recession cyclical peak, which is very encouraging.

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