Brian Jacobsen

Industrial slowdown, but not a swoon

AdvantageVoice® Blog—5-15-13
Brian Jacobsen, Ph.D., CFA, CFP®, Chief Portfolio Strategist

Industrial production declined 0.5% in April after a utilities-driven 0.3% increase in March. March was unseasonably cool, so the output of utilities companies increased. April’s temperatures were a bit more normal, so utilities output declined 3.7% from the elevated March levels.

Manufacturing output declined 0.4% in April on the back of a 0.3% decline in March. Factories appear to be operating at 75.9% capacity, which is 2.8 percentage points below the long-run average. Whether it’s manufacturing for durable or nondurable goods, capacity utilization rates are below their averages. There is little need for major expansions or investment at this point.

Year-on-year, manufacturing, mining, and utilities outputs were all up, 1.3%, 4.2%, and 3.4%, respectively. Although measures like retail sales and gross domestic product have surpassed their prerecession peaks, industrial production and employment still have some catching up to do. This may raise the question of whether the market has run ahead of the economy. Perhaps, but I don’t think so. The market overshot on the way down, declining much more than the economy did. It’s probably only reasonable to assume that the market had to catch up to the economy.      

The views expressed are as of 5-15-13 and are those of Chief Portfolio Strategist Brian Jacobsen, Ph.D., CFA, CFP®, and Wells Fargo Funds Management, LLC. The information and statistics in this report have been obtained from sources we believe to be reliable but are not guaranteed by us to be accurate or complete. Any and all earnings, projections, and estimates assume certain conditions and industry developments, which are subject to change. The opinions stated are those of the author and are not intended to be used as investment advice. The views and any forward-looking statements are subject to change at any time in response to changing circumstances in the market and are not intended to predict or guarantee the future performance of any individual security, market sector or the markets generally, or any mutual fund. Wells Fargo Funds Management, LLC, disclaims any obligation to publicly update or revise any views expressed or forward-looking statements.


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