Industrial Production Shows Weakness

Weakness in industrial production underscores what has been the Federal Reserve's very modest assessment of the factory sector. Industrial production fell 0.1 percent in January with December revised 5 tenths lower to a 0.4 percent gain which is offset in part by a 4 tenths upward revision to November which is now at plus 0.3 percent. The manufacturing component, that is the Federal Reserve's own measurement of goods volumes, is unchanged with both December and November revised 1 tenth lower to unchanged and up 0.2 percent.

The report's two smaller components are mixed. Utility production rose 0.6 percent in the month on top of December's 4.6 percent weather-related surge with the year-on-year rate at a very strong 10.8 percent. Mining, which had been strong, fell 1.0 percent in January with December revised sharply lower to minus 0.4 percent. On a yearly comparison, mining production is still very strong at a an 8.8 percent gain.

But manufacturing production makes up the great bulk of this report and is up only 1.8 percent on the year in what is a far cry from the surging strength evident in small-sample regional reports such as this morning's Philly Fed and Empire State. This report, again in contrast to the anecdotal data, is not consistent with building inflation pressures, evident in capacity utilization which is down 2 tenths to 77.5 percent and a 1/2 point under expectations. For the FOMC, today's results do not turn up pressure for more hawkish policy.

Note that traditional non-NAICS numbers for industrial production may differ marginally from NAICS basis figures.

Recent History Of This Indicator:
The manufacturing component of this report has been an anomaly, showing a long trend of marginal growth against a full year of record readings in regional and private samples and now sharp acceleration underway for actual factory orders and shipments. And yet manufacturing hours were down in the January employment report and have forecasters calling for another weak month of production in this report, at a consensus January gain of only 0.2 percent following a 0.1 percent gain in December. The report's two other components, mining and utilities, have been mixed with the former showing strong growth but the latter up and down on weather-related demand. Taken all together, the consensus gain for January industrial production is, like that for manufacturing, 0.2 percent with total capacity utilization seen rising 1 tenth to 78.0 percent.