Courtesy of Mish.
Economists were surprised again today, this time over industrial production.
The Econoday Consensus Estimate was for a flat reading of 0.0 percent but production fell 0.3 percent.
Moreover, the Fed revised December production lower, to +0.6 percent from +0.8 percent. Effectively, the consensus was off by 0.5 percent.
Blame the Weather
A swing in utility output skewed what is, however, no better than a modest industrial production report for January. Industrial production, reflecting a 5.7 percent weather-related drop for utilities, fell 0.3 percent which is below Econoday’s no-change consensus.
But the real disappointment in the report is the manufacturing component which could muster no better than a consensus gain of 0.2 percent. This reading hasn’t been able to build any momentum to speak of and was held down in January by a sharp 2.9 percent monthly downswing in vehicles. Excluding motor vehicles, manufacturing volumes rose 0.5 percent which is really the highlight of today’s report. Also a highlight though is mining which is the report’s third and smallest component. Mining continues to show new life with a very sharp 2.8 percent jump in January.
Overall capacity utilization reflects the general softness of the industrial sector, at 75.3 percent for a 3 tenths decline in the month and 4.6 percentage points below its long run average. Manufacturing utilization is likewise soft at 75.1 percent.
The industrial economy, held down by weak global demand, has been running below average the past 2-1/2 years, when energy prices first collapsed in mid-2014. But advance indicators, including this morning’s Empire State report, are almost uniformly pointing to a rebound ahead, a rebound however that has yet to appear in the government’s definitive data.
Easy to Predict
This was too easy to predict. On January 18, 2017 I noted Industrial Production Jumps Due to Weather: Good News Stops There.
Due to the jump in December industrial production, The FRBNY upped its first quarter GDP Nowcast estimate up from 2.1% to 2.7% on January 20.
On January 24, in Formulas Don’t Think: Investigating Weather-Related GDP, I commented: “Temperatures have been warmer than normal for most of January. Temperatures in Chicago hit a remarkable 60 degrees last Saturday.”
Here are the weather-related charts I posted.
