U.S. July Industrial Production - Healthy excluding a dip in autos
July industrial production with a 0.2% increase was slightly weaker than expected but manufacturing with a 0.2% increase was in line. A 0.4% increase in manufacturing ex autos however hints at some underlying strength.
Autos see annual retooling shutdowns in early July and the 2.1% decline in July auto output may be temporary, though it does follow three straight gains which may have moved ahead of auto sales.
We had expected some strength in mining and utilities output in July, but gains of 0.2% and 0.5% proved unremarkable, unable to lift the industrial production gain above manufacturing.
The 0.4% increase in manufacturing output ex autos does back positive signals from manufacturing surveys such as the ISM’s. It regains momentum after a modest 0.2% rise in June followed a 0.2% decline in May, which corrected a strong 0.6% gain in April that ensured a strong Q2 overall. July’s data suggests momentum continues into Q3.
High tech industry remains a source of strength with a 1.9% monthly increase, the fourth straight exceeding 1.0%. Business equipment rose by 0.8%, suggesting continued strength in business investment.
