Industrial Production and Manufacturing Capacity Utilization in June 2016

Both these data points are reported in the Federal Reserve G17 data base. The index had an all-time high of 106.70 in November 2014 and has trended down ever since. The good news is that the three month moving average (3MMA) had positive growth month/month in June for the first time since September last year. In June M/M growth on a three month moving average basis, was positive 0.6 percent but the 3MMA growth on a Y/Y basis was negative 1.2 percent.

This means that momentum is positive since there was a short term (3 months) improvement compared to the longer term (12 months) decline. We place less emphasis on the actual numbers than we do direction and we conclude that the June data suggests an improvement in industrial production. Momentum has been positive for 11 straight months. Figure 1 shows the 3MMA of the index and the Y/Y growth. On this Y/Y basis the negativity is decreasing. Data is seasonally adjusted and the index is based on the May 2012 level being defined as 100.