Production loses energy; price news mixed

Industrial production fell 1.4 percent in February; the overall index has now declined for 4 consecutive months and for 10 of the past 12 months. At 99.7 percent of its 2002 average, output was at the lowest level since April 2002. The capacity utilization rate fell to 70.9 percent in February, matching the December 1982 historical low for this series.

While this is unambiguously bad news, it is interesting to note that the decline in was almost entirely attributable to a decline in the sub-index for consumer energy goods; declines in production of residential electricity and natural gas overshadowed increases in fuel production.

The Producer Price Index for Finished Goods advanced 0.1 percent in February. Taken by itself this would be good news—a very moderate rate of price increase. The intermediate goods index dropped by 0.9 percent over the month and the crude goods index fell by fully 4.5 percent. Taking the report as a whole, I am assigning it a neutral score.

As of the release of these two reports, 30.8 percent of the news released in the Principal Federal Economic Indicators has been positive. In February, the monthly index was 21.1 percent.