Industrial production is contracting. Industrial production fell -0.3% in April. This is the 5th straight month of contraction.

Industrial production does not support the Federal Reserve’s thesis that the slowdown in Q1 2015 is transitory in nature and that things will pick up in the second half of 2015.

Industrial Production

Are manufacturers still producing construction supplies and other materials?

Officials at the Fed tend to look at capacity use as a signal of how much slack remains in the economy and how much room there is for growth to accelerate before it becomes inflationary.Source:

Among manufacturing subcomponents, consumer goods output fell -0.3 percent with business goods down -0.4 percent. Construction supplies rose a pathetic 0.1 percent. Auto output rose +1.3 percent on top of March’s +4.3 percent gain.

The industrial economy remains flat and the seasonal springtime bounce has not happened this year.

I think both the industrial production and ISM manufacturing reports gives the Federal Reserve pause in hiking rates. Unless both these reports turn around sharply, I don’t think we get a rate hike before September/October Fed meetings.