Economic data out in the U.S. this morning, suggest that the manufacturing sector is recovering, jobs could be created soon, and inventories remain low.

The Federal Reserve reported that industrial production rose 0.1% in August after having risen 0.7% in July. However, this was below expectations for a 0.3% increase

Capacity utilization for August came in at 74.6%.

Manufacturing output edged down 0.1% in August after three consecutive months of gains. The production at utilities moved up 1.9%, and mining output increased 0.2%.

BMO Nesbitt Burns says that the report was stronger in the details than on the headline. Notably, last month’s result was revised upward from the 0.5% that was initially reported.

“Factory output was weaker than expected on a big drop in vehicle production. Excluding that drop, output was up slightly,” Nesbitt says. “Offsetting the drop in cars and trucks, utilities registered a big bounce, despite the mid-month blackout. Some 59.7% of industries were growing output in August – the broadest increase since the recovery lost speed more than a year ago.”

“Despite the tepid headline advance, August’s industrial production report shows that U.S. manufacturing is definitely on the mend,” says Nesbitt.


In a separate release, the Fed reported that the Empire State PMI came in at 18.4. Economists were expecting a reading of about 15.0.

The Commerce Department reported that the current account deficit was essentially unchanged in the second quarter of 2003 at US$138.7 billion. “On the capital side, net financial inflows rose to US$148.6 billion, up from US$140.7 billion, as foreign demand was positive for equities, corporate debt, and treasuries,” RBC Financial comments.

In a separate release, the Commerce Department reported that business inventories contracted in July, while sales posted the largest gain in four months. Business inventories fell 0.1% to US$1.18 trillion, following a flat showing in June.

“The low level of inventories will eventually need to be replenished, particularly if demand continues to grow at a healthy pace,” RBC says.

“The fact that inventory levels continue to remain depressed is testament to the reluctance of producers to increase inventory stock until proof of a sustained recovery is evident. With more signs emerging every day that the recovery will indeed continue, it’s likely that firms will change their attitudes sooner rather than later.”