Fleet Management

Economic Watch: Industrial Production Rebounds, Homebuilder Optimism Grows

June 16, 2014

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UPDATED -- U.S. industrial production rose 0.6% in May after having declined 0.3% in April, according to a new Federal Reserve report. The decrease in April was previously reported to have been 0.6%.

Manufacturing output increased 0.6% in May after having moved down 0.1% in the previous month. In May, the output of mines gained 1.3 percent and the production of utilities decreased 0.8 percent.

At 103.7% of its 2007 average, total industrial production in May was 4.3% above its level of a year earlier. The capacity utilization rate for total industry increased 0.2 percentage point in May to 79.1%, a rate that is just one percentage point below its 1972–2013 average.

Motor vehicle output increased 1.5% in May after dipping in April, while there were gains in the production of machinery, computer and electronic products, electrical equipment, appliances and fabricated metal products.

“Manufacturing activity appears to be improving after the worst performance in years. Going forward, however, a sustained recovery in production must be supported by larger gains in consumption and business investment,” said Lindsey Piegza, chief economist at the investment firm Sterne Agee. “At this point, it is too early to tell if there is sustained momentum in either of these sectors with the most recent data showing a significant slowdown in the early second quarter after a short-lived rebound in February and March.”

Meantime, builder confidence in the market for newly built, single-family homes rose four points in to reach a level of 49 on the National Association of Home Builders/Wells Fargo Housing Market Index released Monday. It remains one point shy of the threshold for what is considered good building conditions.

“After several months of little fluctuation, a four-point uptick in builder sentiment is a welcome sign and shows some renewed confidence in the industry,” said NAHB Chairman Kevin Kelly. “However, builders are facing strong headwinds, including the limited availability of labor.”

All three index components posted gains in June. Most notably, the component gauging current sales conditions increased six points to 54. The component gauging sales expectations in the next six months rose three points to 59 and the component measuring buyer traffic increased by three to 36.

Looking at the three-month moving averages for regional HMI scores, the South and Northeast each edged up one point to 49 and 34, respectively, while the West held steady at 47. The Midwest fell a single point to 46.

“Consumers are still hesitant, and are waiting for clear signals of full-fledged economic recovery before making a home purchase,” said NAHB Chief Economist David Crowe. “Builders are reacting accordingly, and are moving cautiously in adding inventory.” 

Update adds homebuilder confidence reprot and Piegza comment on industrial production.

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