The Federal Reserve Board reported that industrial production was unchanged in January, but manufacturing activity grew 0.7 percent. The growth in manufacturing production stemmed from higher durable goods activity, which was up 1.8 percent. Nondurable production fell 0.2 percent, but that follows the robust 1.5 percent gain of December. Meanwhile, manufacturers’ capacity utilization rate rose from 76.9 percent to 77.4 percent.
Industrial production remains 3.4 percent higher year-over-year. The fact that it was unchanged was due to less activity in the mining (down 1.8 percent) and utilities (down 2.5 percent) sectors.
For the manufacturing sector, production was 4.7 percent higher in January 2012 than in January 2011, with durables (up 8.3 percent) outpacing nondurables (up 1.1 percent). The largest monthly gains were in motor vehicles and parts (up 6.8 percent), machinery (up 2.2 percent), miscellaneous durable goods (up 2 percent) and apparel and leather products (up 1.9 percent). Declining sectors included petroleum and coal products (down 2.3 percent), wood products (down 1.5 percent) and nonmetallic mineral products (down 1.1 percent).
Overall, these figures show a strong rebound in the manufacturing sector, with large increases in production in the last two months. To help illustrate this, the December figure was revised upward, now showing a gain of 1.5 percent for manufacturing production. With industrial production expected to grow at a moderate pace this year, manufacturers are helping to drive much of that growth.
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.
Chad Moutray is chief economist, National Association of Manufacturers.