No slowdown in the industrial sector

Wells Fargo Research Team Wells Fargo

Industrial production rose more than expected in December, including a 1.0% rise in manufacturing output. With retail sales falling and production rising, inventories are recovering after being wiped out earlier in 2020.

Manufacturing Recovery Moves Along

Spending may be cooling as the latest wave of COVID coincided with fading fiscal support last year, but the industrial sector remains relatively insulated. Industrial production shot up 1.6% in December, in part due to a 6.2% jump in utilities, but more notably a better-than-expected 1.0% increase in manufacturing.

Gains were widespread, with motor vehicles a notable exception. Yet autos still had a solid 2020, with production up 3.6% yr./yr.

Inventories to Rise, but Won't Dent Production Yet

The divergent paths of sales and production last month suggest stronger inventory growth over the near term, which should help prop up topline GDP growth.

But inventories were starting from a lean point, and producers remain bogged down by supply chain disruptions. The backlogs and thin stocks should propel the manufacturing's sector recovery further along in coming months.

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Wells Fargo Research Team

Wells Fargo

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