Industrial Production Shows Life

Industrial production showed life in February, up 1.1 percent but following a soft run that is underscored by a 2 tenths downward revision to January which is now minus 0.3 percent. But February was a very good month, boosted by a 4.3 percent jump in mining where production has been strong for the past year and also long-awaited strength in manufacturing which rose 1.2 percent to top Econoday's high forecast.

The details in manufacturing are very positive with strength centered in business equipment, where rising production points to rising business investment, and also construction supplies which are in demand as builders restock the housing sector. Production of vehicles also picked up as did the selected hi-tech sector which, like mining, has been an important positive for the industrial sector.

February was held back by a 4.7 percent decline in utility production which is subject to weather-related volatility. And a special sign of strength comes from capacity utilization which jumped 7 tenths to 78.1 percent and which will take the notice of Federal Reserve hawks who are looking for capacity stress and related inflationary risks. Yet one month of strength is only one month and a run of strength, especially in manufacturing, will have to unfold before any immediate inflationary concerns develop.

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