The good news pretty much stops there. Revisions took the November reading down from a reported 0.2% to -0.1%.
Another surge in mining and a bounce in utilities offset another disappointment for manufacturing to drive industrial production up 0.9 percent in December to just top Econoday's high estimate. Mining production, up a year-on-year 11.5 percent, has been rising in large monthly clips including December at 1.6 percent. Utility production often swings month-to-month based on weather and rose 5.6 percent in December in contrast to the yearly change which is very modest at plus 1.8 percent.
Manufacturing volumes have also been very modest, at a monthly gain of only 0.1 percent and a year-on-year increase at a very modest 2.4 percent. But December's details are surprisingly positive with vehicle production a highlight, up 2.0 percent in the month, and also selected hi-tech at a solid plus 0.4 percent. Non-durables declined 0.1 percent in the month while production of construction supplies, despite strength in other readings on the sector, was unchanged.
The lack of strength in manufacturing volumes in this report, which is produced by the Federal Reserve, has been a consistent surprise and stands out against factory orders data where year-on-year shipments and new orders growth, measured in dollar terms and produced by the Commerce Department, is in the mid-to-high single digits and, most importantly, is showing acceleration. Another report released by the Federal Reserve where flat is the direction and modest-to-moderate the theme is the Beige Book which will be posted this afternoon.
Fed Industrial Production Report
Let's dive into the December Federal Reserve Industrial Production and Capacity Utilization report for more details.
Industry Groups
- In December, manufacturing output edged up 0.1 percent and was 2.4 percent above its year-earlier level. In the fourth quarter, the index for manufacturing moved up at an annual rate of 7.0 percent.
- The gain in manufacturing in December reflected increases of 0.3 percent and 0.2 percent in the indexes for durables and for other manufacturing (publishing and logging), respectively; the index for nondurables edged down 0.1 percent.
- Within durables, gains were widespread, with the largest advance, 2.0 percent, registered by motor vehicles and parts. Among nondurables, increases for most major industries were offset by declines in petroleum and coal products, in chemicals, and in plastics and rubber products.
- The output of mines rose 1.6 percent in December primarily because of a gain posted by oil and gas extraction; the index was up 11.5 percent from its year-earlier level. In the fourth quarter, mining output advanced at an annual rate of 12.7 percent after being held down by the hurricanes in the third quarter.
Utilization
Surprisingly Positive?
Econoday calls the report surprisingly positive. I call it unsurprisingly weak.
The December strength was weather-related and auto-related. The former is meaningless and the latter is due to the waning effect of hurricanes.
Do we need any more manufacturing capacity? It seems not.
This report may add to GDP estimates for the fourth quarter. But if so, it will be at the expense of first-quarter GDP.
By Mike Shedlock
