The Commerce Department reported some interesting figures this morning on industrial production. Specifically, the government indicated that this key metric was unchanged in February. An increase of 0.4% had been the consensus expectation. However, figures for January were revised upward, and rather aggressively so, taking much of the sting out of this initially disappointing monthly industrial activity result. In short, the initial flat reading for January in industrial was revised up to show an increase of 0.4% for that month. So much for government statistics and their reliability at first blush.
The big reason for the flat overall result--besides the higher base upon which February was measured against following the upward revision for January--was a sharp retreat last month in the mining component. This ongoing slump in this much smaller category offset a modest increase in manufacturing activity to give the flat aggregate posting in industrial production during February.
Meanwhile, manufacturing continues to be the principal driver for the improvement in the industrial sector. In fact, if we include the latest month's 0.3% increase in that area, we find that this metric was up a solid 4.0% in the past year. The February gain of 0.3% in manufacturing, meantime, follows sharp increases of 1.5% and 1.1%, respectively in December and January. Only in November, when manufacturing eased by 0.2%, has that category failed to rise by at least the 0.3% recorded last month in the past six months. At the same time, this was the second straight sharp retreat in the mining sector, with that segment falling by 1.2% in February following a 1.6% setback in the preceding month. The utility sector, the third of the three industrial categories, was flat last month, in large part, we surmise, because of the warmer winter weather, which led to less utility usage across the nation. That flat reading followed back-to-back declines of 3.0% and 2.2% in December and January.
At the same time, capacity utilization at the nation's factories eased from 78.8% in January to 78.7% last month. However, the January figure also was upwardly revised from an initial estimate of 78.5%. The 78.7% February tally, meanwhile, was right on target. Here, as well, manufacturing activity rose nominally last month, with declines in the smaller mining and utility categories. Overall, factory usage is up 1.0% in the past year, an improvement that closely tracks the modest overall steady gains being made in the U.S. economy during this time.
On balance, this was a reasonable report, and combined with earlier reported data showing benign inflation at both the producer and consumer levels, suggests that the Federal Reserve is unlikely to act aggressively in the months to come to further invigorate an economy that seems to now be doing reasonably well on its own.
At the time of this article’s writing, the author did not have positions in any of the companies mentioned.