July 15, 2021 Reading Time: 3 minutes

Industrial production rose 0.4 percent in June, the eighth gain in the last nine months. However, manufacturing output, which accounts for about 75 percent of total industrial production, decreased 0.1 percent. Over the past year, total industrial output is up 9.8 percent with manufacturing posting a similar gain. Both total industrial output and manufacturing output remain just slightly below their pre-pandemic levels (see top of first chart).

Mining output accounts for about 12 percent of total industrial output and posted a 1.4 percent increase in the latest month (see top of second chart). Over the last 12 months, mining output is up 17.8 percent.

Utility output, which is typically related to weather patterns, is also about 12 percent of total industrial output, and increased 2.7 percent for the month (see top of second chart). From a year ago, utility output is up 2.1 percent.

Among the key segments of industrial output, energy production (about 25 percent of total output) jumped 2.3 percent for the month (see bottom of second chart) with gains among all the components. Total energy production is up 9.4 percent from a year ago.

Motor-vehicle production (about 5 percent of total output), one of the hardest-hit industries during the lockdowns and now suffering through a semiconductor chip shortage, plunged 6.6 percent in June following a 7.3 percent surge in May. Vehicle production has been extremely volatile over the last few months (see bottom of second chart). From a year ago, vehicle production is up 7.9 percent. Total vehicle assemblies fell to 8.91 million at a seasonally-adjusted annual rate. That consists of 8.67 million light vehicles and 0.24 million heavy trucks. Within light vehicles, light trucks were 7.26 million while cars were 1.41 million.

High-tech industries output rose 0.6 percent in June (see bottom of second chart) and is up 16.0 percent versus a year ago. High-tech industries account for just 2.2 percent of total industrial output.

All other industries combined (total excluding energy, high-tech, and motor vehicles; about 68 percent of total industrial output) gained 0.2 percent in June (see bottom of second chart) and are 9.5 percent above June 2020. 

Total industrial utilization rose to 75.4 percent in June from 75.1 percent in May. That is still well below the long-term (1972-2020) average utilization of 79.6 percent (see bottom of first chart). Manufacturing utilization fell 0.1 percentage points to 75.3 percent, also still well below its long-term average of 78.2 percent (see bottom of first chart).

Industrial output posted a gain in June, but the total gain masks a wide range of gains and declines among the industries and market segments. Weather and energy production helped boost output in June while ongoing difficulties with labor, logistics, and materials shortages contributed to some of the weakness in manufacturing. Many of the issues causing weakness may start to ease in the coming months and quarters, helping to reduce some of the upward pressure on prices. Substantial excess capacity is one reassuring factor in the outlook for prices. The likelihood of a 1970s-style inflationary spiral remains low.

Robert Hughes

Bob Hughes

Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals.

Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.

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