U.S. industrial production data shows a modest but encouraging improvement in manufacturing activity.

The latest data indicates that industrial production is moving in a positive direction:

Total industrial production increased 0.7% month-over-month and 1.4% year-over-year.

Manufacturing production also improved. Manufacturing output based on NAICS rose 0.6% monthly, with a 3-month moving average increase of 0.4% and an annual increase of 1.4%.

Manufacturing output based on SIC showed a similar trend, rising 0.6% monthly and 1.3% annually.

This suggests that the manufacturing sector is gradually recovering after a period of weakness. The improvement is not only visible in the monthly data but also supported by the 3-month moving average, which helps smooth short-term volatility.

However, capacity utilization tells a more cautious story.

Manufacturing capacity utilization increased 0.5% month-over-month, but it was only 0.2% higher than a year ago. Total capacity utilization rose 0.6% monthly, but was almost unchanged on an annual basis.

This means production is improving, but companies are not yet operating at a much higher level of capacity. In other words, the data points to a gradual recovery rather than a strong expansion.

Overall, this report suggests that the U.S. industrial sector may be moving past its weakest point. Manufacturing activity is improving, but the recovery remains moderate. For the broader economy, this supports the view that the U.S. is slowing, but not collapsing.

The key takeaway:

Industrial production is recovering, manufacturing is improving, but capacity utilization shows that demand is still not strong enough to call this a full manufacturing boom.