Industrial Production: Still Robust But Hints of Cracks

Bottom Line: Overall, US industrial production remains robust. The critical sectors continued to see accelerating growth. But given the weakness in (sometimes more timely) survey data, we are looking for cracks -- and there were certainly hints of those forming in some sectors. 
 
Industrial production rose slightly less than expected in May, but there were upward revisions to earlier data. The Industrial Production report is somewhat lagged relative to regional manufacturing surveys, but it offers hard data that shows activity was still historically robust if decelerating modestly through May. The auto and aerospace sectors remain critical to watch. And they continue to show moderate to even robust growth amid continued volatility. That said, overall manufacturing fell slightly, suggesting the potential that some of the parts suppliers to these sectors might be slowing.Moreover, nondurable manufacturing was no longer accelerating --- manufacturing related to food and beverage, for instance, fell sharply and saw negative annualized growth over the prior three months as consumers shifted back towards consuming products in restaurants and bars, which requires less packaging production.