Industrial Production

July Industrial Production rose .5%, .1% more than consensus and it’s the first gain since Oct ’08. Capacity Utilization rate was 68.5%, .2% more than expected, up from 68.1% in June and rose also for the first time since Oct ’08. The rise in IP was led by a 20.1% gain in auto production as GM and Chrysler plants came back on line after shutdowns in the previous few months. Even with the gain, motor vehicle/parts production is still down 31.6% y/o/y so there clearly is room for further increases that will lend support to Q3 GDP. To quantify, manufacturing production rose 1% but gained just .2% ex motor vehicle and parts. Computer/electronics production rose .6% while machinery fell by .5%. Due to the unseasonably cooler weather in July, utility output fell 2.4%. Historically, IP is never market moving on the day of release but the importance of auto production to the 2nd half recovery theme is big and thus this data grows in relevance.

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