September Industrial Production

On a year-over-year basis, September’s Industrial Production report showed good improvement after firming 4.3%, and causing the recession-induced contraction we have been enduring to shrink a bit.  Thus production is now down 6.1% annualized from minus 10.4% in August.  While some improvement was expected due to the surge seen as a result of the government’s Cash for Clunkers stimulus program, the gains were actually spread across a wide spectrum of manufacturing industries.  Overall, this component showed a gain of .7% for the month versus August’s 1.2% rise, which itself represents a strong revision from the .8% growth originally reported last month.  Mining output also rose, up .7%, while utilities registered a .7% decline.  Capacity utilization improved to 70.5%, now moving persistently up from the nadir of 68.3% seen just last June.  Both the production and utilization numbers exceeded the forecasts made by all 77 economists polled by Bloomberg.  Despite this surprisingly good news, the low rate of capacity utilization argues strongly against an imminent increase in hiring.  If unemployment numbers remain dire, consumer confidence and retail sales will likely stay soft as well.  The good news is welcome and shows a positive trend developing, but there remains a long slog ahead of us.  Still, with the results showing a continued acceleration, we feel the needle for this indicator should be nudged up a notch to the seven o’clock position.  Have you noticed we’ve been doing that more frequently of late?