Manufacturing Production Expanded for the Fourth Consecutive Month

The Federal Reserve said that manufacturing production expanded for the fourth consecutive month. (To be fair, November’s increase was essentially stagnant, up 0.03 percent.) Output in the sector was up 0.2 percent in January, extending the 0.2 percent gain seen in December. The recent improvements suggest that manufacturers are beginning to recover from notable weaknesses over the past two years, with a strong dollar and global headwinds dampening overall activity. In that regard, manufacturing production grew just 0.3 percent year-over-year in January, highlighting the significant challenges seen over the past 12 months in growing production. Similarly, manufacturing capacity utilization edged up from 75.0 percent to 75.1 percent, which, despite some progress, continued to be below the 75.5 percent utilization rate observed one year ago.

Looking more closely at the January manufacturing data, nondurable goods production increased by 0.6 percent, but output among durable goods firms was off by 0.1 percent. The largest monthly gains were seen in the petroleum and coal products (up 1.8 percent), textile and product mills (up 1.8 percent), chemicals (up 1.0 percent), machinery (up 0.9 percent), computer and electronic products (up 0.7 percent), food, beverage and tobacco products (up 0.6 percent) and primary metals (up 0.6 percent), among others. On the other hand, motor vehicles and parts (down 2.9 percent), apparel and leather (down 1.7 percent), aerospace and other miscellaneous transportation equipment (down 0.5 percent), plastics and rubber products (down 0.3 percent), printing and support (down 0.3 percent) and wood products (down 0.3 percent) each had lower production in January.

Meanwhile, total industrial production returned to negative territory, down 0.3 percent in January after jumping 0.6 percent in December. The lower figure stemmed largely from a sharp decline in utilities output, down 5.7 percent, which fell after rising significantly in December, up 5.1 percent. In contrast, mining production was stronger, up 2.8 percent. Over the past 12 months, total industrial production was unchanged, with mining output up 0.4 percent but utilities production off 2.6 percent year-over-year. Capacity utilization was also lower, down from 75.6 percent to 75.3 percent. For comparison purposes, capacity utilization was 75.7 percent on January 2016.

 

Chad Moutray

Chad Moutray

Chad Moutray is chief economist for the National Association of Manufacturers (NAM), 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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