Thursday, 22 of February of 2018

Economics. Explained.  

Industrial Production

February 15, 2018

Industrial production declined 0.1% in January, but that follows increase of  1.7% in October, 0.3% in November and 0.4% in December.   The strength in the final three months of last year probably reflects post-hurricane rebuilding which probably shifted some production forward into the final quarter of last year from the first quarter of this year.  During the past year industrial production has risen 3.7%.  It is gradually gathering momentum.

Breaking industrial production down into its three major sub-components,  the Fed indicated that manufacturing production (which represents 75% of the index) was unchanged in both December and January. During the past year  factory output has risen 1.8% (red line, right scale).  The 2.3% year-over-year increase for November was the largest 12-month increase since July 2014.  The factory sector is clearly staging a modest pickup.

Auto output rose 0.6% in January after having increased 1.1% in December.    During the past year motor vehicle production has risen 1.4%.  Factory production ex motor vehicles has risen 3.8% in the past year.  Thus, factory output has been climbing, but its rate of increase in the past year has been curtailed by a  slowdown in the sales and production of motor vehicles.

Mining (14%) output declined 1.0% in January after having fallen 0.4% in December.  Over the past year mining output has risen 8.8%.  Most of the recent upturn in mining has been concentrated in oil and gas drilling activity.  Oil and gas drilling declined 1.4% in January after having risen 0.9% in December.     Over the course of the past year oil and gas well drilling has risen 31.2%.  The number of  oil rigs in operation has rebounded in recent months.  Drilling activity is poised to resume its upward trajectory.

Utilities output rose 0.6% in January after having jumped 4.6% in December.  During the past year utility output has risen 10.8%.

Production of high tech equipment rose 0.9% in January after having risen 2.2%, 2.0% and 1.8% in the October, November, December period.  Over the past year high tech has risen 7.9%, but in the past three  months high tech production has climbed at a steamy 19.2% pace.   Thus, the high tech sector sector appears to have gathered considerable momentum in recent months. This is an indication that the long slide in nonresidential investment has come to an end which would, in turn, signal an upturn in productivity growth.

Capacity utilization in the manufacturing sector was unchanged in January at 76.2%.  It is slightly below the 77.4% that is generally regarded as effective peak capacity.

Stephen Slifer


Charleston, SC

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