Industrial production fell 1.8 percent in January due to a big drop in auto production as well as weakness in machinery, computers and mining. Construction supplies fell, consistent with the housing correction. Capacity utilization levels dropped again suggesting continued weak profits. Data are consistent with our recession outlook.
Broad-based Weakness in Manufacturing
- Manufacturing production declined 13 percent compared to a year ago with weakness in autos, machinery and computers. Materials output were down 11 percent.
- Auto output plunged 23 percent and is down over 43 percent compared to a year ago. Both cyclical and structural factors are at work. Autos have a long workout ahead.
Capacity Utilization: A Weaker Profits Signal
- Unfortunately, the weakness in business equipment reflects the fundamental deficiency in corporate profits and a lack of business confidence in the future.
- Lower capacity utilization rates suggest weaker corporate profits. There has been a sharp drop-off in utilization in many sectors including computers and materials.
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