 | Industrial Production Increased 0.4% in November |
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| Posted Under: Data Watch • Industrial Production - Cap Utilization • Retail Sales • COVID-19 |
Implications: The recovery in the industrial sector continued in November. Moreover, the readings in prior months were revised higher, and when included with the headline +0.4% boosted November's gain to 0.8%. Industrial production has now made up 71% of the decline in activity seen during the height of COVID-19 lockdowns back in March and April, but still has a way to go. We expect a continuing rebound in the factory-sector in the months ahead, and here is why. October's report on retail sales showed consumer spending up 4.9% from its February pre-pandemic level, and personal consumption spending on goods is up 7.8% over that same period. The pandemic has clearly shifted consumer preferences from services (like travel or attending sporting events) toward goods, and that represents a strong source of demand for US factory output until the pandemic is completely behind us. Looking at the details, the biggest source of strength in November came from the manufacturing sector which increased 0.8%, the seventh consecutive monthly gain. Both auto manufacturing and non-auto manufacturing contributed to the increase, rising 5.3% and 0.4% respectively. Keep in mind that auto manufacturing has already made a full V-shaped recovery and is now flat versus a year ago while non-auto production is still down 3.9% over the same period. Look for monthly gains in non-auto manufacturing to outstrip readings from the auto sector as the former series continues to make up ground. Meanwhile, the beleaguered mining sector posted a gain of 2.3% in November, primarily the result of an increase in extraction activity at oil and gas wells. The one major drag on activity in November came from utilities which fell 4.3%, the result of warmer than normal temperatures reducing demand for heating. In other recent factory-related news, the Empire State Index, a measure of New York factory sentiment, fell to +4.9 in December from +6.3 in November. Also today on the inflation front, import prices increased 0.1% in November, with a 4.3% jump in fuel prices more than offsetting a decline in nonfuel prices. Meanwhile, export prices increased 0.6%, led by agricultural exports, which rose 3.7%. In the past year, import prices are down 1.0%, while export prices are down 1.1%.
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