US dollar selling accelerated after the industrial production benchmark revisions, here's why
The US industrial sector was much softer than reported over the past 3 years.
Minor benchmark revisions are routine but this was a complete overhaul and it paints a picture of a soft industrial sector.
Looking closer, durable goods production in 2012 was lowered to 3.5% from 6%. In 2013 it was cut to 2% from 5%.
The numbers show the industrial sector is operating at 77.8% of capacity, not 78.4% as reported. That leaves an output gap that could make the Fed more tentative about hiking. The available slack makes wage hikes and investment less likely than anticipated.
The trend isn't comforting for the Fed either. After rising 4.5% in 2015, production so far this year is negative. That's probably a shale story but it's still unexpected slack.
The overall picture is overwhelmingly negative. The Fed provides a poor chart to illustrate the change. It looks like a small deviation but the index was lowered to 107.1 from 110.0. That means the industrial sector is 2.6% smaller than the Fed thought.
