US Industrial Production: Another gain in November and October revised higher

The 0.2% increase in US industrial production in November may have missed the 0.3% increase that had been expected, but it follows upward revisions to the prior month, noted analysts from Wells Fargo.

Key Quotes:

“Industrial production increased 0.2 percent in November which was a notch short of the 0.3 percent that had been expected. That said, it was hardly a disappointing report due to the fact that the prior month’s initially reported gain of 0.9 percent was revised higher to 1.2 percent. In fact, on a three-month annualized basis, industrial production is now growing at the fastest clip in more than three years.”

“Manufacturing, which comprises more than three quarters of all output, was also up 0.2 percent, adding to its 1.4 percent surge in October. The gains in manufacturing were all concentrated on the durable-goods side, offsetting some modest weakness in non-durable industries. Within durables, gains were broad-based with the largest increase in primary metals production. Even motor vehicles, where sales have been soft lately, notched a small 0.1 percent increase in November.”

“While capacity utilization is still muted for this mature stage of the economic cycle, there was some improvement this month. As you might expect, the warm weather meant extra slack in the utilities space; however other categories moved higher, if only modestly. Manufacturing utilization hit 76.4 percent, and although that is below the long-run average, it actually marks the greatest use of manufacturing capacity since May 2008.”

“While industry is less influential in the broader economy than it was a generation ago, the slack here may help to explain why the Fed’s inflation target has been so elusive in this cycle.”

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