NAM: Industrial production, manufacturing fare better than forecasted in January

The Federal Reserve reported Wednesday that total industrial production rose 0.9 percent in January, Bloomberg News (2/17, Chandra) reports, which is the most since November 2014 and more than the 0.4 percent increase expected by economists.

Manufacturing output, in “a sign the industry was starting to stabilize at the beginning of the year,” rose 0.5 percent, also beating economists’ forecasts of a 0.2 percent increase. The December manufacturing output was revised to a 0.1 percent drop. Factory production was “boosted by the biggest gain in the output of consumer goods since July on increases in both durables and nondurables,” with output of consumer goods rising 1.6 percent after four months of decreased output.

Meanwhile, utility output rose 5.4 percent in response to January’s cold snap and winter weather, mining production remained unchanged for the fourth straight month, and machinery production rose 0.7 percent.

NAM chief economist Chad Moutray commented on the Fed’s January report, IndustryWeek (2/17, LaWell) reports, saying that “Manufacturing activity remains softer than desired, particularly given difficulties in growing export demand and with falling commodity prices.”

The article states “Many of the struggles of the last quarter were blamed on the mild winter weather…along with the appreciating dollar, the plummeting price of oil and disappointing export demand.” Moutray added that manufacturing output rose 1.2 percent in the past year, “better than the 0.5% bump during the year preceding that but still ‘slowed considerably since January 2015, when the year-over-year rate was a more-robust 4.3%.’”

According to the AP (2/17, Rugaber), production of cars and car parts climbed the 2.8 percent, the most since July 2015, while “furniture output climbed 1.4 percent, and food production advanced 0.8 percent.” The article adds the Fed data “could raise hopes that manufacturing may be stabilizing after output declined for much of last year.” BMG Capital Markets economist Jennifer Lee said, “This encouraging report should help quiet the recession calls of late.”

Reuters (2/17) reports industrial capacity use was up to 77.1 percent in January from 76.4 percent in December. The article also noted industrial production in the northeast may have been suppressed by the blizzard, but was boosted by increased demand for heating fuels after a relatively warm beginning to winter.

The Wall Street Journal (2/17, Mitchell, Subscription Publication) reports analysts said it was not clear yet if the January report was an outlier or an indicator of a broader trend. IHS Global Insight economist Michael Montgomery said, “January was just a good month in a long string of weak or mediocre months, with no assurances that the January performance has any staying power or will not be offset by a weak February.”