MAPI Analysis on Industrial Production: Growth Led by Transportation
The following is an analysis from Daniel J. Meckstroth, Ph.D., Vice President and Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI), regarding the industrial production report for July 2012.
“The Federal Reserve Board reported that industrial production increased 0.6 percent in July. Manufacturing production gained 0.5 percent and both mining (1.2 percent) and utility production (1.3 percent) expanded at a rapid pace,” said Daniel J. Meckstroth, Chief Economist for the Manufacturers Alliance for Productivity and Innovation (MAPI). “The strength of the July report is surprising given that the ISM Index suggested much weaker industry activity.
“Underlying the top-line growth, the gain was uneven. Within the 20 major manufacturing industries, 11 industries grew, 7 declined, and 2 were unchanged,” he noted. “A large part of the growth came from the transportation industry. The need to replace worn-out vehicles pushed motor vehicle and parts production up 3.3 percent. The replacement cycle for aircraft, as well as operating economies and new models, allowed aerospace and miscellaneous transportation equipment to expand 1.6 percent.
“Manufacturing production growth was front loaded this year, with a surge in the winter followed by a meek spring,” Meckstroth concluded. “MAPI forecasts continued growth in manufacturing production activity in the second half of 2012, but the pace of expansion should be only marginally faster than the tepid growth pace of the overall economy.”