US Industrial Production has slightly missed estimates with mild negative surprises coming throughout the data series.
The growth of production has certainly slowed in recent months. With a downward revision to May’s monthly production, in addition to June’s monthly growth of +0.4% (which was a miss on the +0.6% growth expected), year-on-year growth is moderating quickly now. Manufacturing Production showed a slight decline of -0.1% on the month.
To cap off the sting of underwhelming data, there was also a negative surprise in the Capacity Utilization data. June’s utilization improved to 75.4% but missed expectations of 75.6%.
Capacity Utilization had been sliding for about 18 months into the pandemic, but even as the recovery has taken hold, is still around -1% off its pre-pandemic levels. Whilst there is an ongoing improvement to be seen, this slightly sluggish level of recovery will not be great news for the hawks on the FOMC.
Other US data to digest
This also comes in the wake of a mixed series of US data on jobs and Fed manufacturing surveys at 1330BST:
- Weekly Jobless Claims Mildly higher than expected at 360k (350k exp, 386k previous)
- Philly Fed Manufacturing index disappointed with a fall to 21.9 (28.1 exp, 30.7 last)
- Empire State Manufacturing (New York Fed) jumped more than expected at 43.0 (17.9 exp, 17.4 last).
These fairly much leave expectations where they were. The labor market is improving, but perhaps not as much as the hawks on the FOMC would like. The two regional Fed surveys pretty much cancel out each other in their forward-looking impact.
Market reaction:
- USD was mixed in the wake of the Fed surveys, however, has since started to slip slightly after the Industrial Production.
- EUR/USD has increased c. 5/10 pips
- Little real volatility on the data as it has changed very little.
