Industrial Production data for June and January – June 2016

August 24, 2016

Bottom line:  The Industrial Production data for June point to a sharp reversal, from contraction to expansion, in the high-technology sectors, which has positively impacted the indices for the entire industrial sector. Revenues from exports have jumped higher, while revenues from domestic sales are stagnating.

Specifics:

  • The Index of Industrial Production has been very volatile throughout the first half of 2016, but posted strong gains in May and June.
  • The conflicting currents at work show up most clearly in the trend data: high-technology industries showed a very strong annualised rate of increase in April-June, of 14.7% — up from only 4.3% in January-March.
  • In the medium-high technology industries, the picture was reversed: the trend data show an annualised rate of decline of 8.9% in production in April-June, much worse than the 3.6% rate of decline in January-March.
  • Thanks to the weight of the high-tech sector in the overall industrial sector, the overall index for industrial production rose at a 6.1% annual rate in Q2, up from 3.4% in Q1.
  • The high-tech revival also enabled the industrial sector to post very high rates of increase in revenues from export sales in April-June. As a result, the trend of export revenues swung from negative in 2015 and into January 2016, to a rate of gain of almost 1% per month in the second quarter.
  • In sharp contrast, revenues from domestic sales have stopped rising in recent months, on a trend basis.
  • The sharp improvement in high-tech has not yet fed through into employment. The index of employee jobs in high-tech declined by 1.6% in January-June, while traditional industries added labour, so that overall employment in industry was almost unchanged.

In actual hours worked, a similar pattern prevailed — of a small decline in high-tech industries versus gains in traditional and medium-high tech sectors, with a slight net gain overall.

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