Factory Output Continues to Expand

ABC NEWS --Industrial production rose 1.2 percent in May as manufacturing remained a key engine of the economic recovery. The Federal Reserve says output at the nation's factories, mines and utilities rose over April's 0.7 percent increase. The industrial sector's gains reflect the growing strength of the recovery.

MP: On an annual basis, industrial production increased 7.6% in May compared to last year, which is the largest annual gain since January 1998 (see chart).

Update: Bottom chart above shows the industrial production index, by request.  The index reached an 18-month high in May of 103.5, the highest level since November 2008.  Separately, capacity utilization reached a 19-month high in May of 74.7%, the highest since October 2008.    

Update: See Scott Grannis' related post U.S. industrial production in a solid recovery, where he comments:  "U.S. industrial production has risen at a 8.8% annualized pace since hitting bottom in June 2009. At this pace industrial production will have completely recovered to its former highs in 12 months."

Note: If that happens it will be a much faster recovery than the period following the 2001 recession, when it took industrial production almost 4-and-a-half years to recover from the June 2000 high of 104.25.  It wasn't until October 2004, 52 months later, that factory output exceeded 104.25.  Scott adds: "The pace and the magnitude of the current recovery both exceed that of the recovery from the 2001 recession. I just don't see why the gloom and doom persists."

Update from First Trust: "Manufacturing continues to lead the V-shaped recovery. Since the low in June 2009, manufacturing production is up at an 8.8% annual rate, which is faster growth than even during the tech boom of the late 1990s. We expect rapid gains in production to continue."