Earlier this week the Federal Reserve released the US industrial production data for September 2011. Overall the growth was in-line with market expectations, rising by 0.2%m/m compared with no-change in August and a jump of 1.1%m/m in July (manufacturing production was up 0.4%m/m in September). The improved data for July to September (Q3 2011) follows a very weak Q2 2011 performance (see discussion below).
In addition capacity utilisation edged higher to 77.4% in September from 77.3% in August and a recent low of 67.3% in June 2009.
The improvement in production activity during September 2011 means that US manufacturing output rose by a much healthier 4.3%q/q, seasonally adjusted, annualised in Q3 2011. This compares with a decline of 0.1%q/q (seasonally adjusted, annualised) in Q2 2011.
This volatility in production was mainly as a result of the vehicle industry, which was heavily disrupted by the major earthquake in Japan earlier this year. In fact, vehicle production fell by 15.8%q/q (seasonally adjusted, annualised) in Q2 2011, but then grew by 21.4%q/q (seasonally adjusted, annualised) in Q3 2011. Excluding vehicles, manufacturing production was up 1.4%q/q (seasonally adjusted, annualised) in Q2 2011 and up 2.8%q/q (seasonally adjusted, annualised) in Q3 2011.
The improvement in manufacturing activity, coupled with the recent improvement in retail sales (which showed a solid and better than expected performance in September, while the August and July growth rates were both revised up), means consumer spending growth in Q3 looks to have risen by around 2%q/q to 2.5%q/q. With external trade a small positive in Q3 2011 and business equipment spending also adding to growth, there is now probably upside risk to the 2.0% GDP consensus growth forecast for Q3 2011.
More significantly, the nervousness about US growth in Q4 2011 is reducing, especially as a result of the lack of any rise in jobless claims. Some analysts and research institutions (including ECRI) have been convinced that the US would experience a return to recession in Q3/Q4 2011, but now that seems somewhat unlikely. There is more, and justified, concern about US growth in 2012, especially if there is significant fiscal austerity in 2012; although this concern takes second place to developments in the Euro Area over the coming weeks/months.
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