Manufacturing Production Rebounded in December

The Federal Reserve said that manufacturing production rebounded in December after pulling lower in November, with output in the sector up 0.2 percent in the latest report. Manufacturers have struggled to increase demand over the past couple years, with a strong dollar and global headwinds dampening overall activity, but recent data have started to reflect a turnaround in sentiment. In that regard, manufacturing production grew 0.2 percent year-over-year in December, its first positive reading since June but still indicating essentially stagnant growth over the past 12 months. Similarly, manufacturing capacity utilization edged up from 74.7 percent to 74.8 percent, which, despite some progress, continued to be below the 75.2 percent utilization rate observed one year ago.

Looking more closely at the December manufacturing data, durable goods production increased by 0.5 percent, but output among nondurable goods firms was off by 0.3 percent. The largest monthly gains were seen in the motor vehicles and parts (up 1.8 percent), primary metals (up 1.4 percent), computer and electronic products (up 0.9 percent), machinery (up 0.9 percent), fabricated metal products (up 0.7 percent), food, beverage and tobacco products (up 0.7 percent) and nonmetallic mineral products (up 0.7 percent). On the other hand, there were also a number of sectors with declining production in December, including textile and product mills (down 3.0 percent), electrical equipment and appliances (down 1.1 percent), chemicals (down 1.0 percent), aerospace and other transportation equipment (down 0.8 percent) and printing and support (down 0.8 percent).

Meanwhile, total industrial production jumped 0.8 percent in December, bouncing back from a decline of 0.7 percent in November and representing the largest monthly gain since March 2014. Output from utilities soared, up 6.6 percent, following decreases in the three prior months. That helped to push mining production up 6.2 percent year-over-year. At the same time, mining production was flat, with a decline of 2.8 percent over the past 12 months. Overall, total industrial production rose 0.5 percent year-over-year, its first positive reading since August 2015. Capacity utilization was also higher, up from 74.9 percent to 75.5 percent, which was not far from the 75.4 percent rate seen on December 2015.

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM) and the Director of the Center for Manufacturing Research for The Manufacturing Institute, where he serves as the NAM’s economic forecaster and spokesperson on economic issues. He frequently comments on current economic conditions for manufacturers through professional presentations and media interviews. He has appeared on Bloomberg, CNBC, C-SPAN, Fox Business and Fox News, among other news outlets.
Chad Moutray

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