Industrial Production Jan 2009

John Silvia, Chief Economist

[email protected] ● 704-374-7034 February 18, 2009

Industrial Production: Autos Drove Output Lower, Recession Persists 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

Capacity Utilization: A Weaker Profits Signal

• 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.

• 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.

Total Industrial Production Growth

Industrial Production -- Business Equipment

Output Growth by Volume, not Revenue

15%

Output Growth by Volume, not Revenue

15%

30%

10%

10%

20%

20%

5%

5%

10%

10%

0%

0%

0%

0%

-5%

-5%

-10%

-10%

-10%

-10%

-20%

-20%

-15%

-30%

Both Series are 3-Month Moving Averages

-15%

3-Month Annual Rate: Jan @ -13.8% Year-over-Year Change: Jan @ -8.0%

-20% 87

89

91

93

95

97

99

-30%

3-Month Annual Rate: Jan @ -8.3% Yr/Yr % Change: Jan @ -9.0%

-20% 01

03

05

07

-40%

09

-40% 87

Industrial Production -- Motor Vehicles & Parts 100%

30%

Both Series are 3-Month Moving Averages

89

91

93

95

97

99

01

03

05

07

09

Capacity Utilization -- Stage of Processing

Output Growth by Volume, not Revenue

100%

Both Series are 3-Month Moving Averages

80%

80%

60%

60%

40%

40%

20%

20%

0%

0%

-20%

95%

Percent of Capacity

95%

Series are 3-Month Moving Averages

90%

90%

85%

85%

80%

80%

75%

75%

-20%

-40%

-40%

3-Month Annual Rate: Jan @ -47.9% Yr/Yr % Change: Jan @ -29.8%

-60% 87

89

91

93

95

97

99

-60% 01

03

05

07

09

70%

70%

Finished: Jan @ 69.3% Crude: Jan @ 83.9% Primary: Jan @ 70.4%

65% 87

89

91

93

95

65% 97

99

01

03

05

07

09

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