Factory switch is still on; but growth is slow, and metals prices are impatient
July 19, 2024
Key Observations:
U.S. industrial production grew by +0.6% MoM in June and (upwardly revised) +0.9% MoM in May, according to Federal Reserve data. This is the strongest two-month span since November 2021. On a YoY basis, the +1.6% growth in June 2024 is the highest rate since November 2022 (+1.8%). U.S. IP had contracted YoY in 9 of the prior 12 months (June 2023 thru May 2024).
These data support our view that an expansionary phase in global manufacturing began in Feb-24, ending a sluggish phase that began in Jun-22; however, it is early innings, and total global factory growth is slow and somewhat fragile (On taking the under and the over, 7-Mar-2024). This is a headwind for copper, aluminum, and steel.
Still, there are pockets that stand out. U.S. motor vehicle assemblies were 11.63 million units SAAR last month (+7.6% YoY). This output compares to 10.17 million units SAAR in Jan-24 (-1.8% YoY). For reference, the 2023 United Auto Workers strike was in effect from Sep 15 thru Oct 30. Light vehicle production is an ongoing vulnerability for commodity demand, given high financing costs and mounting tensions over tariffs and other trade barriers. But for now, autos are better than feared.
Recent industrial production data for China, India, Japan, and South Korea are also slow but good.
We also learned this week that OECD electricity generation was 819.7 TWh in April 2024, for growth of 2.9% (+23.3 TWh) YoY. Net production growth ytd was +2.4% YoY through that month.
Source: Federal Reserve, NBS, CSOI, Statistics Korea, METI, IEA, LME, Blacklight Research.
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