The Federal Reserve Industrial Production and Capacity Utilization report shows Industrial production decreased 0.6 percent in March.
Revisions took February to -0.6 from -0.5, and January from +0.6 to +0.5.
Is the weather to blame?
The report shows “For the first quarter as a whole, industrial production fell at an annual rate of 2.2 percent. A substantial portion of the overall decrease in March resulted from declines in the indexes for mining and utilities, which fell 2.9 percent and 1.2 percent.”
Econoday Economists’ Predictions
While pondering the effect of mining and utilities let’s take a peek at economists’ predictions.
The Bloomberg Econoday consensus estimate for industrial production was -0.1% in a range of -0.5% to +0.4%.
Where does Bloomberg find these optimists every month? It’s a mystery.
Regional reports have been signaling emerging strength for the factory sector which helps ease the sting from a second straight 0.6 percent contraction for industrial production, the latest report for March.
The manufacturing component, pulled down by a 1.6 percent decline in vehicle production, fell 0.3 percent following, after a downward revision, a 0.1 percent decline in February. Weakness in vehicle production is no surprise given declines underway in vehicle sales.
The report’s other two components are also in the negative column, at minus 1.2 percent for a second month of contraction for utilities and at a very steep minus 2.9 percent for mining which, showing no lift yet from the gain in oil prices, is now in contraction for seven straight months. Capacity utilization is also down, 5 tenths lower to 74.8 percent which is not a plus for factory employment.
The depreciation in the dollar and uptick in oil prices are pluses for manufacturing, a sector however that clearly showed no traction in March.
Note that the traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.
Swings in utility output, typical at this time of year and especially evident during this winter’s unusual weather, often skew the headline for the industrial production which dropped 0.5 percent in February to mask a respectable 0.2 percent rise in the manufacturing component. Forecasters see overall production improving but still slipping by 0.1 percent in March with manufacturing slowing, to only a consensus 0.1 percent gain. This report, at consensus, would not raise the economic outlook.
Weather or Autos?
Bloomberg blames February the weather for masking a “respectable 0.2 percent rise in the manufacturing component” last month.
This month manufacturing was down 0.3% thanks to a 1.6 percent decline in vehicle production.
Econoday reports “Weakness in vehicle production is no surprise given declines underway in vehicle sales.”
- If autos were no surprise why did economists predict -0.1%?
- What about the negative revisions?
- And what about the economist who predicted +0.4%? Is he reading anything at all or is he simply from Bizarro World where up really means down?
Industrial Production 1990-Present
Industrial Production Detail Since 2014
Realistically speaking, I see only one possible conclusion:
We’ve had bad weather for 13 of the last 16 months starting November 2014.
Mike “Mish” Shedlock
James Greenberg said:
If economists accurately predicted declines, then they would be accused of causing the declines. There’s a component of Heisenberg’s Uncertainty Principle (the observer influencing the experiment) and a component of the fallacy of conflating observation with endorsement (I tell the truth, therefore I endorse the truth).
Economists would rather be wrong and blameless than right and culpable. Look at it this way, if they were just stupid and guessed, they would be right 50%+/- of the time. To be wrong 100% of the time requires planning.
To be wrong 100% of the time requires a college degree.
James Greenberg said:
Usually, but not exclusively, from an Ivy League school!
“To be wrong 100% of the time requires planning”
Year ago, when I used a different “screen named” and was banned twice by “Black Swan”, I stated that when Mish began to write 2 or 3 topics per day, then the end was near.
You young folks don’t know what it was like, years ago, when Mish would post, maybe, one topic per day. I made the comment that the “end” would come fast and swift and things would fall apart all over the place and that would be the sign.
It is happening. Soon, Mr. Mish may have to post a topic every hour just to keep up with the riots, bank closings, factory shut downs, protests, etc.
What ever happened to Black Swan and Fed Watcher?
James Greenberg said:
Can’t argue with that. Mish is the canary in the coalmine, I’ve thought that for years … for way longer than anyone thought possible.
Simply incredible how long TPTB have kept this charade going… all those plates spinning & wobbling…
I thought the large & final crash would’ve happened by now, esp. after so many truths & lies were uncovered in 2007 & 2008. But here we are, 8+ years later, and I do wonder whether the cronies & criminals haven’t found some way to keep their plates spinning forever… if the reckoning hasn’t come by now, will it ever come?
Rick Weldon said:
Here in the Northeast we have had a relatively mild winter with little snow. That’s about the only thing “unusual” I’ve noticed. Why do these statistics come to us with built in explanations/excuses? Just give us the numbers and we’ll do our own interpretation.
Dan G. said:
Notice of expedited meeting of the Federal Reserve.
The meeting Calendar this week with the Whitehouse.
I think you mean good weather, as that would cause lower utility output. I know my heating costs were down at least 30% this winter.
Tony Bennett said:
NYFRB GDP Nowcast update
Q1 went from +1.1% to +0.8%
Q2 tracking @ +1.2%
The main stream economic press is very optimistic…actually I sort of get cognitive dissonance reading Mish and my country’s leading news about US economy. Today the headline was that US industry production is heading upwards…look is positive…and so on…yep yep…they truly seem to make a positive spin of things whatever way they can.
That why it is extremely important to read and introduce different views to oneself. I am – perhaps seen and been through so much – rather a pessimist (realist?) than optimistic fool. I was on my first job in banking when everything crashed early 1990’s and that was the end of my career on that field…LOL. It took 4-5 years to find any proper job. Those experiences gave a good look what happens when everything goes down the drain. Adult men were sweating in front of Reuters screens. I never forget those expressions on their faces. Disbelief and an attempt to smile pretending it was just temporary. It wasn’t.
One thing I learned from those days. Never get into debt too deep. And keep assets in different countries just in case. I’ve done just that. Not that I have much but I just like to feel a bit safer in case something of an Armageddon appears from the horizon. I have a bit of land also so in case everything else fails I can always eat potatoes. ;D
Tony Bennett said:
Rail validates weakness
WASHINGTON, D.C. – Apr. 13, 2016 – The Association of American Railroads (AAR) today reported U.S. rail traffic for the week ending Apr. 9, 2016.
For this week, total U.S. weekly rail traffic was 479,059 carloads and intermodal units, down 14.1 percent compared with the same week last year.
Total carloads for the week ending Apr. 9 were 229,704 carloads, down 20 percent compared with the same week in 2015, while U.S. weekly intermodal volume was 249,355 containers and trailers, down 7.8 percent compared to 2015.
For the first 14 weeks of 2016, U.S. railroads reported cumulative volume of 3,372,955 carloads, down 14.2 percent from the same point last year; and 3,589,027 intermodal units, up 0.8 percent from last year. Total combined U.S. traffic for the first 14 weeks of 2016 was 6,961,982 carloads and intermodal units, a decrease of 7.1 percent compared to last year.
I LOVE that summary
quote “We’ve had bad weather for 13 of the last 16 months starting November 2014.”
could not be better ………. thanks Mish
Mark L. said:
Why is a decrease in utilities caused by good weather a negative?!? That should free up more money to be used elsewhere! Less fossil fuel usage, more shopping! Win Win!
The O’care tax kicked in.
Shhhhhhhhh… no one may speak of the damage/stupidity caused by the ‘community organizer’ in the White House. He’s a saint, a savior, a genius. All the liberal history books will say so… so it must be true.
Sandra Beckman said:
Time is going on . Novigation of industry is Solar i guess.
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