The Federal Reserve Board reported that industrial production rose 0.4 percent in December, rebounding from the 0.3 percent drop in November. Year-over-year growth in industrial production is up 2.9 percent. Meanwhile, manufacturers’ capacity utilization edged higher from 75.3 percent to 75.9 percent for the month.
For the manufacturing sector, production rose 0.9 percent, led by healthy increases in both durables (up 0.9 percent) and nondurables (up 0.8 percent). Since December 2010, manufacturing production increased by 4 percent, with durable goods production increasing by 7.1 percent for the year. Nondurable goods production rose 0.8 percent year-over-year.
The largest monthly gains were in wood products (up 4.2 percent), primary metals (up 3.2 percent), machinery (up 2.1 percent) and plastics and rubber products (up 1.6 percent). Declining sectors included aerospace and miscellaneous transportation products (down 1.2 percent), paper (down 1 percent), nonmetallic mineral products (down 0.8 percent) and furniture and related products (down 0.8 percent).
These numbers suggest that manufacturing production is rebounding from weaknesses in recent months. The 0.9 percent growth rate in December was the highest level since December 2010 – a sign of strength as we move into 2012. More importantly, the gain was more broad-based than in recent months, with both durable and nondurable goods manufacturing activity picking up.
Domestic industrial production is expected to grow at a moderate pace this year. While a number of significant headwinds might derail these predictions – including the developments in Europe – manufacturers by-and-large remain optimistic about activity over the coming months. It will be important for policymakers to adopt pro-growth policies that will enable these optimistic sentiments to come to fruition.
Chad Moutray is Chief Economist, National Association of Manufacturers.