{"id":310,"date":"2014-09-15T09:35:20","date_gmt":"2014-09-15T13:35:20","guid":{"rendered":"http:\/\/naroffeconomics.com\/?p=310"},"modified":"2014-09-23T10:37:49","modified_gmt":"2014-09-23T14:37:49","slug":"august-industrial-production","status":"publish","type":"post","link":"https:\/\/naroffeconomics.com\/?p=310","title":{"rendered":"August Industrial Production"},"content":{"rendered":"

KEY DATA:<\/strong> IP: -0.1%; Manufacturing: -0.4%; Vehicles: -7.6%<\/p>\n

IN A NUTSHELL:<\/strong> \u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153If you believe that vehicle production is crashing, I have a bridge for sale and you can buy as much of it as you like.\u00e2\u20ac\u009d<\/em><\/strong><\/p>\n

WHAT IT MEANS:<\/strong> \u00c2\u00a0One of my more common warnings is that the headline number hides what is truly going on and the devil is in the details.\u00c2\u00a0 Well, welcome to the August industrial production report.\u00c2\u00a0 Output fell in August for the first time since January<\/em><\/strong>, and we know what the weather did to everything that month.\u00c2\u00a0 Worse, manufacturing production was down sharply.<\/em><\/strong>\u00c2\u00a0 So, has the industrial sector finally come to a grinding halt?\u00c2\u00a0 Yeah, right.\u00c2\u00a0 The biggest decline was in vehicles, where assembly rates dropped by nearly 12%.<\/em><\/strong>\u00c2\u00a0 Of course, the pace of new vehicle construction had surged by almost 13% in July, highlighting the problem with seasonal adjustments when trends change.\u00c2\u00a0 The important point is that vehicle sales in August hit their highest level in 8\u00c2\u00bd years, so output is likely to expand further.\u00c2\u00a0 It is clearly not shrinking.<\/em><\/strong>\u00c2\u00a0 Indeed, the 3-month assembly rate average was the highest since early 2006, when the housing bubble was funding everything that moved and didn\u00e2\u20ac\u2122t move.\u00c2\u00a0 Meanwhile, the rest of the economy was doing just fine.\u00c2\u00a0 Production of high tech products, consumer products, business equipment and business and construction supplies were all up.\u00c2\u00a0 <\/em><\/strong><\/p>\n

Adding to the belief that the manufacturing sector is in great shape was the September Empire State Manufacturing Survey<\/em><\/strong>, a product of the New York Federal Reserve Bank.\u00c2\u00a0\u00c2\u00a0 The index hit its highest level in almost five years as new orders surged, hiring jumped and backlogs built.<\/em><\/strong>\u00c2\u00a0 Enough said.<\/p>\n

MARKETS AND FED POLICY IMPLICATIONS:<\/strong> \u00c2\u00a0It is sometimes good to get a headline that is so obviously misleading as today\u00e2\u20ac\u2122s industrial production number.<\/em><\/strong>\u00c2\u00a0 It is not that the data are wrong; it is just that sometimes the marquee number is not reflective of what is actually going on.<\/em><\/strong> \u00c2\u00a0The data are often volatile and the seasonal adjustments sometimes don\u00e2\u20ac\u2122t work right if conditions change.\u00c2\u00a0 That was true with today\u00e2\u20ac\u2122s industrial production decline and was likely the case with the weak August employment report. \u00c2\u00a0Basically, the manufacturing sector is strong and should continue to lead the way.\u00c2\u00a0 The FOMC starts its 2-day meeting tomorrow and on Wednesday Janet Yellen will hold a press conference.\u00c2\u00a0 I expect the statement and the discussion to focus on changing the thinking from rates staying low an extended period to the strategy that the data will drive decisions.<\/em><\/strong> \u00c2\u00a0If the numbers are stronger than projected, the Fed will be prepared to move sooner than expected.\u00c2\u00a0 This report changes nothing and investors will have to start getting used to the reality that the Fed is going to raise rates, most likely during the first half of next year.<\/p>\n","protected":false},"excerpt":{"rendered":"

KEY DATA: IP: -0.1%; Manufacturing: -0.4%; Vehicles: -7.6% IN A NUTSHELL: \u00c2\u00a0\u00c2\u00a0\u00e2\u20ac\u0153If you believe that vehicle production is crashing, I have a bridge for sale and you can buy as much of it as you like.\u00e2\u20ac\u009d WHAT IT MEANS: \u00c2\u00a0One of my more common warnings is that the headline number hides what is truly going … Continue reading August Industrial Production<\/span> →<\/span><\/a><\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,16,1],"tags":[],"class_list":["post-310","post","type-post","status-publish","format-standard","hentry","category-economic-indicators","category-industrial-production","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/310","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=310"}],"version-history":[{"count":1,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/310\/revisions"}],"predecessor-version":[{"id":311,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=\/wp\/v2\/posts\/310\/revisions\/311"}],"wp:attachment":[{"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=310"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=310"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/naroffeconomics.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=310"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}