Industrial production for February returned to the negative column in a Fed report today on Production and Capacity Utilization. It’s down 0.5% from January.
In the past 14 months industrial production has only been up twice. Last month, January, was one of those months. In January, colder than normal weather spurred a surge on utilities. The January surge of +0.9%, today revised to +0.8% is in relation to a dip of 0.7% in December (now revised to -0.5%).
As with most bureaucratic reporting, significant revisions are the norm.
The Bloomberg Econoday Consensus was for a decline of 0.2%, overoptimistic as usual.
Industrial production fell 0.5 percent in February but includes a respectable and higher-than-expected 0.2 percent gain for manufacturing production which pulls this report to the positive column for the economic outlook. The utility component, down 4.0 percent in February after rising 4.2 percent in January, is very volatile reflecting month-to-month swings this time of year in heating demand. The mining component, down again at minus 1.4 percent, has been weak for the last year reflecting the price collapse for commodities.
But the manufacturing component is the telling component with strength belying broad weakness in regional surveys and pointing perhaps to better-than-expected output for the first quarter. Vehicles have been a center of strength for manufacturing, though production here did slip 0.1 percent in the month, while business equipment is suddenly showing life, up 0.6 percent for a second straight month. The gain for this component hints at a revival for business investment.
Capacity utilization overall is down 0.4 percentage points to 76.7 percent though manufacturing capacity, again the reading to focus on, is unchanged at 76.1 percent. The factory sector has been getting pulled back by weak exports and weak demand for energy equipment though this report, together with positive indications in yesterday’s Empire State report, do suggest, or at least offer the hint, that the worst may over.
Revision History
As revised, the last four months look like this:
Index of Industrial Production
Bloomberg claims “together with positive indications in yesterday’s Empire State report, do suggest, or at least offer the hint, that the worst may over.”
I will explore that thought later today with an article that suggests the worst may be yet to come.
Mike “Mish” Shedlock
The rate of economic contraction is a steady 7.5% per year. Obamacare taxes on corporations kicked last November. The individual Obamacare tax is hitting now. The only compensation for a new heavy tax is spend less, hire less, and lay off people. I noticed prices during Christmas were higher so I did not purchase anything yet. Raising prices is not an option.
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Student debtors avidly vote for Sanders free stuff and a $10 minimum wage. They did not learn compound interest in high school, but they are getting remedial practical lessons in college. If it ain’t free they never can afford it. They live hand to mouth from burger to burger and one cell phone payment to another.
It will only continue to contract. Manufacturing is a competitive environment, where all gains are hard fought, and improvements incremental. The past 4 decades of rampant, out of control financialization and money printing, have resulted in earnings improvements from productive manufacturing activities beeing completely dwarfed by the gains shareholders have derived from simpleminded financial and legal trickery. Which has led even the most down to earth manufacturing company to promote those that contributed most to the bottom line: Lawyers and financial hacks, into virtually all executive positions.
So now, we’re left with a manufacturing climate where noone with actual decision power has the remotest clue how to manufacture even a sandwich. All they know how to do, is borrow more money to “buy back shares” while telling some youngster to make a nice looking Powerpoint presentation. “Extract Value” from their “IP Portfolio”, by harassing and shaking down those few souls out there still brave enough to try doing something useful. And pay their lobbyists to ensure the easy money spigot for share buybacks stay open indefinitely.
It would be one thing if the above was just exaggeration for effect. But it’s not. It literally is all there is to America anno now. All “earnings” are just chimeras derived from skimming a few percent off of a card house of ‘asset value appreciation.” While none derives from taking actual inputs, and transforming them into more valuable outputs.