 | Industrial Production increased 0.4% in December |
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| Posted Under: Data Watch • Industrial Production - Cap Utilization |
Implications: Excellent news on the factory sector in December. Although industrial production grew slightly less than the consensus expected, revisions to prior months put growth on par with expectations. More importantly, overall industrial production was held down by a 2.7% drop in utility output, a result of unusually warm December weather. Talking out utilities and mining (which was up in December), manufacturing surged 0.9%, the largest gain in 2011. Sometimes large increases in manufacturing are due by a temporary spike in auto production, but not this time. Manufacturing ex-autos was up 0.9%, also the largest gain this year. We have been following these numbers all year, to try to focus on the underlying trend, and that trend is still accelerating, up 3.3% versus a year ago, but up at a 4% annual rate in the past three months. High-tech is another good sign. After falling for three straight months due to major flooding in Thailand (one of the world's leading production centers for hard disk drives and semiconductors), high tech output increased 0.6% in December. More timely news on the manufacturing sector is also good. The Empire State index, a measure of activity in New York, increased to +13.5 in January from +8.2 in December. As recently as October, the index was -7.2. On the housing front, the market index from the National Association of Home Builders, which measures their confidence, increased to 25 in January, easily beating consensus expectations and the highest reading since 2007. As recently as September, the index was at 14.
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