A newly released report from the Federal Reserve showed U.S. industrial production dipped 0.1 percent in January. Among durable consumer goods categories, the production of automotive products dropped 3.9 percent and the output of home electronics fell 1.3 percent. Among nonindustrial supplies, the output of construction supplies declined 0.1 percent in January following gains of 1.0 percent in December and 2.5 percent in November. In addition, the production of materials to be processed further in the industrial sector moved down 0.2 percent, with the output of durable materials slipping 0.2 percent; the production of nondurable materials declined 0.7 percent. Smaller losses were reported in January for the indices for wood products; nonmetallic mineral products; computer and electronic products; electrical equipment, appliances, and components; and miscellaneous manufacturing.

These losses were partly offset by an increase of 2 percent for appliances, furniture, and carpeting and a small gain for miscellaneous goods. A weather-related jump of 3.1 percent in the output of consumer energy products boosted the index for consumer nondurables. In other market groups, the output of business equipment edged up 0.1 percent in January, while the production of defense and space equipment increased 0.4 percent. Gains were recorded in the indices for fabricated metal products, machinery, aerospace and miscellaneous transportation equipment, and for furniture and related products.

Capacity utilization for durable goods manufacturing declined 0.6 percentage point to 77.7 percent, a rate 0.6 percentage point above its long-run average. At the crude stage, utilization fell 1.1 percentage points to 88.5 percent, a rate 2.2 percentage points above its long-run average; at the primary and semifinished stages, utilization increased 0.4 percentage point to 76.4 percent, a rate 4.6 percentage points below its long-run average; and at the finished stage, utilization decreased 0.6 percentage point to 77.8 percent, a rate 0.6 percentage point above its long-run average.
Mining output fell 1.0 percent in January, its first decline since August 2012, with capacity utilization at mines decreasing to 90.8 percent—a rate 3.4 percentage points above its long-run average.

According to Dr. Ken Mayland, president of ClearView Economics, LLC, manufacturing is still laboring under an inventory slowdown and suffering from the debilitating impacts of economic and business uncertainties generated by the political scene. Total business inventories edged up just 0.1% for December, but more importantly the year over year change of 5.1% exceeded the year over year change of total business sales (+3.6%). “That's typically a negative signal for manufacturing, and that's before any negative effects of fiscal drag took hold,” he explained.

The other side of the picture, according to Dr. Mayland, is that manufacturing is being run lean, and production "oomph" is being stockpiled, and will probably be uncorked well before the ending of the year.


The complete January U.S. industrial production report is available online.