Positive News in Industrial Production and Capacity Utilization

The Federal Reserve has released its January readings on industrial production and capacity utilization. Most economic reports have been soft, but this one actually looks better than expected, as well as better than the December reports.

Industrial production increased by some 0.9% in January, after decreasing by 0.7% in December. The Federal Reserve also said that a storm late in the month likely held down production in January by a small amount. Bloomberg had called for a gain of only 0.4%, and December’s -0.7% report was actually revised from a preliminary view of -0.4% for December.

The production index for utilities jumped by some 5.4%. The Fed showed that demand for heating moved up markedly, after having been suppressed by unseasonably warm weather in December.

Manufacturing output increased by about 0.5% in January. That was up by 1.2% from its level a year earlier. Mining production was unchanged, but that follows four consecutive months of 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.
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Capacity utilization for the industrial sector even showed an uptick as well. This is a pleasant bit to see, although capacity is still running well under average and is one of the major reasons you don’t see U.S. corporations rushing out to build new state-of-the-art factories and plants. Capacity increased by 0.7% in January to 77.1% — still some 2.9 percentage points below its long-run average.

Additional subgroup data was shown as follows:

• Manufacturing output rose 0.5 percent in January, with increases of about 1/2 percent both for nondurables and durables and a small decrease for other manufacturing (publishing and logging).
• Within nondurables, the largest gains, about 1 percent, were posted by food, beverage, and tobacco products and by chemicals, while the largest decreases, about 2 percent, were recorded by apparel and leather and by printing and support.
• Results for the major durable goods industries were spread between a drop of 1.3 percent for electrical equipment, appliances, and components and a gain of 2.8 percent for motor vehicles and parts.
• 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.
• Capacity utilization for manufacturing increased 0.3 percentage point in January to 76.1 percent, a rate that is 2.4 percentage points below its long-run average.
• 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.
• 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.