Once again, economists have a damn hard time figuring out when it’s cold and when it’s not, even weeks after the weather has come and gone.
Industrial production surged 0.9% in January vs. Econoday Expectations of a 0.4% gain. The biggest part of the rise was utility production.
In December, weather was unseasonably warm, and in January seasonably cold. The January surge follows a December downward revision from -0.4% to -0.7%.
A sharp gain in motor vehicle production underpins a very strong industrial production report where the headline surged 0.9 percent in January which is far above Econoday’s plus 0.4 percent consensus and 0.6 percent high-end estimate. The gain lifts capacity utilization to 77.1 percent for a strong 7 tenths gain from a downward revised December.
Vehicle production surged 2.8 percent in the month and drove the manufacturing component up by 0.5 percent, a gain that compares with a plus 0.2 percent consensus and a high-end estimate of 0.4 percent. But manufacturing was also supported by capital goods, an area that has been weak but which did gain 0.3 percent in the month.
The utilities component, up a monthly 5.4 percent and reflecting a temperature swing from a warm December to a more seasonably cold January, is the major factor behind the headline gain. Mining, hit by low energy and commodity prices, continues to lag, coming in unchanged in the month for a year-on-year decline of 9.8 percent.
Total year-on-year industrial production also remains in the negative column, at minus 0.7 percent, a disappointment but a contrast to manufacturing where the year-on-year rate is modest but accelerating, at plus 1.2 percent.
A negative in the report is a downward revision to December, to minus 0.7 percent from minus 0.4 percent. But the revision doesn’t take much away from the January surprise where strength, based in manufacturing and underscoring January’s rise in retail auto sales, should help ease concern over the economy’s first-quarter performance.
Actually, the revision does take away quite a bit from the report. Had December not been so weak, January would not have risen as much.
By the way, the surge in autos comes on the heels of two consecutive negative months. Vehicles production fell 1.7% in December and 1.5% in November. For more details, please see my January 15, report December Retail Sales Negative; Other Economic Data Horrid.
Industrial Production Summary
The above chart from today’s Federal Reserve report on Industrial Production and Capacity Utilization.
Revisions and a Question of the Day
Note the negative revisions in manufacturing (light blue highlights). Four out of the last five months are lower vs. previous estimates.
Also note the long strings of poor economic data (orange highlights).
Does that yellow highlight column of numbers from today look more like an outlier or the beginning of a manufacturing surge?
Mike “Mish” Shedlock