Industrial Production Surges

A sharp gain in motor vehicle production underpins a very strong industrial production report where the headline surged 0.9 percent in January which is far above Econoday's plus 0.4 percent consensus and 0.6 percent high-end estimate. The gain lifts capacity utilization to 77.1 percent for a strong 7 tenths gain from a downward revised December.

Vehicle production surged 2.8 percent in the month and drove the manufacturing component up by 0.5 percent, a gain that compares with a plus 0.2 percent consensus and a high-end estimate of 0.4 percent. But manufacturing was also supported by capital goods, an area that has been weak but which did gain 0.3 percent in the month.

The utilities component, up a monthly 5.4 percent and reflecting a temperature swing from a warm December to a more seasonably cold January, is the major factor behind the headline gain. Mining, hit by low energy and commodity prices, continues to lag, coming in unchanged in the month for a year-on-year decline of 9.8 percent.

Total year-on-year industrial production also remains in the negative column, at minus 0.7 percent, a disappointment but a contrast to manufacturing where the year-on-year rate is modest but accelerating, at plus 1.2 percent.

A negative in the report is a downward revision to December, to minus 0.7 percent from minus 0.4 percent. But the revision doesn't take much away from the January surprise where strength, based in manufacturing and underscoring January's rise in retail auto sales, should help ease concern over the economy's first-quarter performance.

Recent History Of This Indicator
The range of estimates is wide but industrial production is expected to rise a strong 0.4 percent in January, reflecting strong utility output tied to the month's heavy weather and helped in part by what is expected to be a 0.2 percent gain for the manufacturing component where trends have otherwise been very soft. The gain for manufacturing is based not on regional Fed reports, which have been weak, but on hours data in the January employment report which were strong. The report's third component, mining, has been very weak due to low commodity prices.