Industrial production edged higher in December, but down for Q4
|Summary
Industrial production notched a modest gain in December but contracted during the fourth quarter. Manufacturing rose slightly. Falling capacity utilization points to a lack of both pricing pressure and things to do for manufacturing workers.
One step up and two steps back
A modest uptick in industrial production for December finishes the year on a somewhat brighter note, but after factoring in a miserable report in October, output contracted at an annualized rate of 3.1% for the fourth quarter as a whole (chart).
Factory output was up 0.1% in December, but the gain comes at the cost of a downward revision to November which puts the index level not meaningfully changed from where it had been last month (chart). This is more or less exactly what could be expected with the ISM manufacturing index down for 14 straight months and the production component of that index barely in expansion at 50.3 in December.
In terms of the factors influencing manufacturing production, it was something of a reversal of recent trends. The past year could be broadly characterized as one in which consumer durable production has been under pressure amid a preference for service-related spending on the part of the consumer (chart). Meanwhile, manufacturing tied in any way to the soaring pace of construction associated with the CHIPS Act has generally been on the upswing. The opposite was evident in today's report with production of consumer goods up 0.2%, largely from increased production of durable consumer goods. Note that motor vehicle production was up 1.6% after the post-strike surge of 7.4% in November. The indexes for business equipment, construction supplies, and business supplies all registered slight declines in December. We do not view either of these developments as the beginning of a new trend.
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