Computer & Electronic Product Output Continues To Outperform

by Jonathan Custer

Summary

  • Industrial Production (IP) rose for its fourth consecutive month after March and April’s sharp contraction (Chart 1)
  • IP remains 7.6 percent below its December 2019 level (Chart 1)
  • Durable Manufacturing output was up 0.7 percent in August, led by Computers and Aerospace products (Chart 2)
  • Computer & Electronic Products (CEP) continue to significantly outperform all other sectors in industrial manufacturing with production up 5.5 percent y/y and 2.3 percent even during the Great Lockdown (Chart 2 & 3)
  • Semiconductor output grew 6.7 percent y/y in August compared to 1.8 percent for the same period in 2019 (Chart 2 & 4)
  • Output growth slowed significantly in August compared to June and July, which is consistent with our view the global economic rebound has plateaued and is in a holding pattern due to concerns over a second wave of the pandemic and political uncertainty (Chart 3 & 4)
  • It is unclear how much of the outperformance of CEP was carry forward one-off COVID purchases and precautionary supply chain stocking

Industrial production rose 0.4 percent in August for its fourth consecutive monthly increase. The production index measures real output and is expressed as a percentage of real output in a base year, currently 2012.

However, even after the recent gains, the index in August was 7.3 percent below its pre-pandemic February level. Manufacturing output continued to improve in August, rising 1.0 percent, but the gains for most manufacturing industries have gradually slowed since June. Mining production fell 2.5 percent in August, as Tropical Storm Marco and Hurricane Laura caused sharp but temporary drops in oil and gas extraction and well drilling. The output of utilities moved down 0.4 percent. At 101.4 percent of its 2012 average, the level of total industrial production was 7.7 percent lower in August than it was a year earlier. Capacity utilization for the industrial sector increased 0.3 percentage point in August to 71.4 percent, a rate that is 8.4 percentage points below its long-run (1972–2019) average but 7.3 percentage points above its low in April.

Source: Federal Reserve

Chart 1

Chart 2

Chart 3

Chart 4