Industrial production declined 0.1 percent in February after having risen 0.3 percent in January; output in January was previously estimated to have edged down 0.1 percent. Manufacturing output increased 0.4 percent in February, and the gain in January was revised up to 0.9 percent. Outside of manufacturing, the output of mines rose 0.8 percent in February, which more than reversed its decline in January. However, the output of utilities fell 4.5 percent--the drop reflected unseasonably warm weather in February, which reduced the demand for heating after two months of unseasonably cold temperatures. At 95.5 percent of its 2007 average, total industrial production was 5.6 percent above its year-earlier level. The capacity utilization rate for total industry edged down 0.1 percentage point to 76.3 percent, a rate 4.2 percentage points below its average from 1972 to 2010.
Once again, the drop was largely caused by utility output dropping rather than industry numbers dropping. Let's look at more details:
In February, manufacturing output rose 0.4 percent, and over the past 12 months the level of factory production has climbed almost 7 percent. Capacity utilization for manufacturing moved up 0.2 percentage point to 74.3 percent, a rate 4.8 percentage points below its average from 1972 to 2010 but almost 9 percentage points above its trough in June 2009.The production of durable goods advanced 0.9 percent in February, and gains were widespread across its major categories. The output of motor vehicles and parts rose 4.2 percent following an increase of 4.5 percent in January; since December 2010, total motor vehicle assemblies have risen about 1 million units to an annual rate of 8.5 million units. Sizable gains also were recorded in February in wood products; nonmetallic mineral products; computer and electronic products; electrical equipment, appliances, and components; furniture and related products; and miscellaneous manufacturing. Among other industries, the indexes for fabricated metal products and for aerospace and miscellaneous transportation equipment recorded small increases, the index for machinery was unchanged, and the index for primary metals decreased.
Production in nondurable manufacturing was unchanged in February. Declines in the indexes for food, beverage, and tobacco products; chemicals; and plastic and rubber products were offset by gains elsewhere. Production in the non-NAICS manufacturing industries (logging and publishing) was down 0.8 percent.
In February, mining output rose 0.8 percent, and capacity utilization moved up 0.6 percentage point to 88.4 percent, a rate 1.0 percentage point above its average for the period 1972 to 2010. The gain in mining output largely reflected higher crude oil and natural gas extraction along with increased support activity for mining. The output of utilities dropped 4.5 percent, and the capacity utilization rate fell to 78.0 percent, a rate 8.5 percentage points below its average from 1972 to 2010.
Note that manufacturing output increased; increases in durables were "widespread" while non-durables were unchanged. In short, the inside numbers look solid.
Let's turn now to the Empire State numbers:
The Empire State Manufacturing Survey indicates that conditions for New York manufacturers continued to improve in March. The general business conditions index inched up 2 points, to 17.5. The new orders and shipments indexes fell but remained above zero, while the unfilled orders index rose above zero for the first time in a year. Price indexes continued to climb, suggesting that price increases had accelerated. Employment indexes were positive and above their February levels, indicating that employment had expanded. Future indexes were little changed, as respondents continued to be strongly optimistic about the six-month outlook, although future price indexes were sharply higher.
The overall index moved up a touch. This is not a massive move, but does indicate positive momentum. However, the new orders index declined, as did the unfilled orders index. Also note prices increased. Overall this is good news, but there are concerning internal developments that we'll have to keep a watchful eye on.
Finally, let's look at the Philly Fed:
Sharp acceleration in new orders is boosting the assessment of business conditions in the Philly Fed's manufacturing sector. New orders jumped more than 16-1/2 points in the March reading to 40.3, above zero to indicate month-to-month growth and far above February to indicate a sharp month-to-month acceleration in growth. Showing a 7-1/2 point gain to a very strong 43.4 is the general business conditions index, a reading that is not a composite but a single question on the sample's subjective assessment of month-to-month business conditions.
Other readings are also strong but mostly do not show acceleration relative to February. Shipments are nearly unchanged at a very strong 34.9; unfilled orders are unchanged at a what is a very strong 14.9 for this reading; price data show steady rates of pressure for both inputs and outputs; delivery times show a slight easing in delays; employment shows a slight month-to-month slowing in hiring.
Inventories show a major build relative to February in an indication that the region's manufacturers are scrambling to secure enough inputs for future output. Of special note is a more than 16 point jump to 63.0 for the six-month outlook.
This is also a strong reading with solid internals.
Overall, this week's data indicates the manufacturing sector is in good shape.
As an FYI, Kash over at the Street Light Blog has a few really good posts up about manufacturing. Here are the links
US Manufacturing is now leading
A Lean, Mean Manufacturing Machine
Winners and Losers in Manufacturing
