Friday, March 16, 2007

Industrial Production Ramps Up

From the Federal Reserve:

Industrial production increased 1.0 percent in February after a decrease of 0.3 percent in January and a rise of 0.8 percent in December. Output in the manufacturing sector gained 0.4 percent in February and was led by increases in motor vehicles and in high-technology goods. The output of utilities jumped 6.7 percent in February, as colder-than-average temperatures boosted production at both electric and natural gas utilities. The output of mines edged up 0.1 percent. At 113.1 percent of its 2002 average, overall industrial production for the month was 3.4 percent above its year-earlier level. The rate of capacity utilization for total industry in February rose 0.6 percentage point, to 82.0 percent, a level 1.0 percentage point above its 1972-2006 average.

The big increase came in consumer goods which increased a very large 1.5%, and utilities which increased 6.7%.

We've been getting a mixed signal from the industrial/manufacturing statistics for the last few months. The regional Fed surveys have been mixed, the ISM is hovering around neutral, yet the industrial production number jumped a pretty large 1% in March.

It's important to remember this jump was in two areas, one of which (utilities) can be attributed to weather related issues. In addition, the downward GDP revision from earlier this month was attributed to a technical inventory issue. Commentators noted because of the downward revision in inventories industrial production would have to increase. It appears that is happening.