Industrial Production Surges On Vehicle Production And Construction Supplies

A surge in motor vehicle production together with construction supplies along with a strong gain for business equipment drove a rare 1.1 percent December increase in manufacturing production that far surpasses Econoday's consensus range where the top estimate was only 0.4 percent.

Mining production, at 1.5 percent, also rose sharply in December though utility production, down 6.3 percent and likely reflecting unseasonably warm weather, was an offset as overall industrial production did no more than hit Econoday's consensus at a 0.3 percent gain.

Vehicle production, fed by gains for autos and especially light trucks and despite what has been a flat year for vehicle sales, jumped 4.7 percent in the month while construction supplies, which have been in short supply for the last year, rose 1.6 percent. Business equipment, which has been in solid demand for the last year, rose 0.5 percent. But consumer goods have not been in demand, unchanged in the month and up only 1.0 percent on the year.

And the year-on-year rates tell the story for industrial production, rising 7.8 percent for vehicles and up 5.0 percent for business equipment but up only 2.1 percent for construction supplies. Manufacturing as a whole rose only 3.2 percent in 2018 vs a vast 13.4 percent rise in mining. Utility production fell 4.3 percent last year.

The yearly gain for total industrial production was 4.0 percent vs 2.9 percent in 2017 and only 0.5 percent in 2016. Capacity utilization ended 2018 at 78.7 percent, moderate but up from 77.3 and 75.7 percent in the prior two years.

Indications from many regional reports were pointing to factory slowing at year end though today's report, and it's definitive set of economic numbers, tells the opposite story -- one centered in the unexpected gain for vehicles. Yet separate data on factory orders and shipments are being delayed by the government shutdown and do cloud what to expect for manufacturing's contribution to fourth-quarter GDP.

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