Industrial Production Falls Up to 1% in August 2010

The headline release for industrial production (IP) for August 2010:

Industrial production rose 0.2 percent in August after a downwardly revised increase of 0.6 percent in July. The downward revision in July primarily resulted from newly available data on the output of four industries within manufacturing: iron and steel, construction machinery, paper, and pharmaceuticals. The index for manufacturing output rose 0.2 percent in August after having advanced 0.7 percent in July; the step-down in the rate of increase reflected a fallback in the production of motor vehicles and parts, which had jumped sharply in July. Excluding motor vehicles and parts, manufacturing output increased 0.5 percent in August after having gained 0.2 percent in July. Production at mines moved up 1.2 percent in August, while the output of utilities moved down 1.5 percent. At 93.2 percent of its 2007 average, total industrial production in August was 6.2 percent above its year-earlier level. The capacity utilization rate for total industry rose to 74.7 percent, a rate 4.7 percentage points above the rate from a year earlier and 5.9 percentage points below its average from 1972 to 2009.

Whenever you see a very small seasonally adjusted number – further investigation is necessary. A 0.2% increase is not much of an increase. EconIntersect uses unadjusted data. Unadjusted data is analyzed YoY. This is a graph of the unadjusted IP data:

It might be difficult to see that August 2010 is less than July 2010. To determine MoM growth, the July 2010 data against the July data for 2005, 2006, 2007, 2008, and 2009. Then do the same for August 2010. Then compare the results MoM.

YoY Improvement for July 2010 and August 2010        
  Jul 2010 Aug 2010 MoM Improvement?  
2005 -1.05% -2.13% FALSE  
2006 -3.92% -4.77% FALSE  
2007 -6.60% -7.25% FALSE  
2008 -4.64% -3.23% TRUE  
2009 6.83% 5.95% FALSE  

Seasonally, the July 2010 data is stronger except for 2008. Either because of the recession or the New Normal, seasonal adjustment factors are not working properly right now. However, the August 2010 Industrial Production may be down as much as 1% MoM in August 2010, but up 5.95% YoY.

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