US Industrial Production Rebounds from a Harsh December Drop to Start 2016

Here's a great take on what's happening in the industrial market by Michael Montgomery, US Economist, IHS Global Insight.

"Total industrial production — output of mines, utilities, and manufacturing — surged 0.9%, but December had slumped by 0.7%.

"Utilities, off for three consecutive months to end 2015, spiked up by 5.4% as weather became more normal. Mining held constant in January and manufacturing rose 0.5%, but had sagged by 0.2% in each of the prior two months. In short, January looked good on the surface, but looks dreary over longer-term spans. After all, even with a good January bounce, total industrial production was 0.7% below last January.

"So-called core manufacturing, or factory output excluding motor vehicles and high-technology, firmed by 0.3% to start 2016, but notched a goose egg and a 0.1% drop to end 2015. That averages about a 0.07% gain each month, very close to the average monthly gain that produced a 0.8% firming over the past twelve months. When you take out the industries benefiting from the recovery in housing, the malaise deepens further back toward zero.

"Thus 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. Food output, roughly one seventh of manufacturing, spiked up by 0.8%, but that sector is prone to exaggerated monthly moves with reversals the following month; that could reverse about a third of the January manufacturing gain in one fell swoop.

"The process of adjusting to a strong dollar and right-sizing inventories is ongoing. Each bout of global bad news seems to ratchet the dollar higher and make adjustment harder. Compound adjustments like this are like an unexpected visit from your in-laws. You know it will end, but do not know when or how unpleasant it will get. Some portions will be better than others. It will take time and seem to drag out forever, but it will end—just not soon enough. Meanwhile, the malaise drags on."

TAGS: Economy
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