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Total
industrial
production (IP) increased 0.9% in January (+0.4% expected).
The increase was greater than expected in large part because December’s reading
was revised lower (from -0.4% to -0.7%). A storm late in the month likely held
down production in January by a small amount. The index for utilities jumped
5.4%; demand for heating moved up markedly after having been suppressed by
unseasonably warm weather in December. Manufacturing output increased 0.5% in
January and was 1.2% above its year-earlier level. Mining production was
unchanged following four months with declines that averaged about 1.5% per
month. At 106.8% of its 2012 average, total industrial production in January
was 0.7% below its year-earlier level.
Industry
Groups
As
mentioned above, manufacturing output rose 0.5% in January (+0.2% expected),
with increases of about 0.5% both for nondurables and durables and a small
decrease for other manufacturing (publishing and logging). Within nondurables,
the largest gains, about 1%, were posted by food, beverage, and tobacco
products and by chemicals, while the largest decreases, about 2%, were recorded
by apparel and leather and by printing and support. Paper output fell 0.5%
(-2.7% YoY).
Results
for the major durable goods industries were spread between a drop of 1.3% for
electrical equipment, appliances, and components and a gain of 2.8% for motor
vehicles and parts. Wood products IP rose 1.2% (+4.6% YoY). Within mining,
substantial decreases for oil and gas well drilling and servicing, for coal
mining, and for nonmetallic mineral mining were offset by increases for oil and
gas extraction and for metal ore mining.
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Capacity
utilization (CU) for the industrial sector increased 0.7 percentage point in
January to 77.1% (76.7% expected), a rate that is 2.9 percentage points below
its long-run (1972-2015) average. Manufacturing CU increased 0.3 percentage
point in January to 76.1%, a rate that is 2.4 percentage points below its
long-run average. CU of industries defined as manufacturing under the NAICS system
rose 0.4% (-0.1% YoY).
The
operating rates for durables and nondurables each rose 0.3 percentage point,
while the utilization rate for other manufacturing (publishing and logging)
fell 0.1 percentage point. Wood Products CU rose 0.9% (+2.0% YoY) to 72.1%;
Paper fell 0.4% (-2.5% YoY) to 81.3%. The operating rate for mining moved up
about 1/2 percentage point, and the rate for utilities rose nearly 4 percentage
points; the rates for both sectors were nearly 9 percentage points below their
long-run averages.
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Capacity
at the all-industries level was unchanged (+1.4% YoY) at 138.6% of 2012 output.
Manufacturing edged up +0.1% (+1.4% YoY) to 139.4%. Wood Products extended the
upward trend that has been ongoing since November 2013 when increasing by 0.3%
(+2.6% YoY) to 161.3%. Paper ticked down 0.1% (-0.2% YoY) to 116.8%.
The
Federal Reserve included preliminary forecasts of industrial capacity for 2016
in the January report. Measured from fourth quarter to fourth quarter, total
industrial capacity is projected to rise 0.5% this year after increasing 1.5%
in 2015. Manufacturing capacity is expected to advance 1.1% in 2016, about the
same pace as in 2015. Capacity in the mining sector is estimated to fall 3.2%
in 2016 after rising 4.2% in 2015. Capacity at electric and natural gas
utilities is projected to increase 0.8% for a second consecutive year.
The foregoing comments represent the
general economic views and analysis of Delphi Advisors, and are provided solely
for the purpose of information, instruction and discourse. They do not
constitute a solicitation or recommendation regarding any investment.
