Financial Controls: USA Industrial Production Ekes Out Post-Great Recession High (Chart) *Highest since August 2008*

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Federal Reserve Statistical Release: Industrial Production and Capacity Utilization

Official Statement by the Federal Reserve (June 15, 2011) Industrial production edged up 0.1 percent in May, the second consecutive month with little or no gain. Revisions to total industrial production in months before May were small. In May, manufacturing production rose 0.4 percent after having fallen 0.5 percent in April. The output of motor vehicles and parts has been held down in the past two months because of supply chain disruptions following the earthquake in Japan. Excluding motor vehicles and parts, manufacturing output advanced 0.6 percent in May and edged down 0.1 percent in April; the decrease in April in part reflected production lost because of tornadoes in the South at the end of the month. Outside of manufacturing, the output of mines increased 0.5 percent in May, while the output of utilities fell 2.8 percent. At 93.0 percent of its 2007 average, total industrial production in May was 3.4 percent above its year-earlier level. Capacity utilization for total industry was flat at 76.7 percent, a rate 3.7 percentage points below its average from 1972 to 2010.

Trend The short-term trend is mostly flat, with 2 monthly decreases in the last 4 months. The intermediate-term (6 months) and long-term (12 months) trends continue upwards, indicating USA industrial production is expanding..

Cycle History The USA Industrial Production Index set a Post-Great Recession peak of 92.98 in May 2011. A Great Recession cyclical low of 83.53 was set in June 2009. The Pre-Great Recession peak was reached of 100.72 in September 2007.

Industrial Production Index (Chart) Below is a chart of the USA Industrial Production Index from the Pre-Great Recession cyclical peak of 100.72 in September 2007 through the latest month reported. After the Great Recession cyclical low of 83.53 in June 2009, USA industrial production increased 15 consecutive months (July 2009 through September 2010). In the 8 months following, there have been 3 monthly decreases and a Post-Great Recession high was set in May 2011 of 92.98.

Commentary The May 2011 USA Industrial Production Index of 92.98 (preliminary) is a Post-Great Recession cyclical peak and a 33-month high (August 2008 was 96.06). However, the Index has been mostly level since March 2011. Overall, the May 2011 increase was only +0.10%, following a -0.03% decrease in April, and a +0.61% increase in March. Monthly increases of 1.00%+ can occur during robust expansion. Therefore, the May 2011 Index is somewhat disappointing and increases concern about the impact of high oil prices and a resulting slowdown of economic expansion.

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