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Industrial Production: Utility Drag Masks Modest Imprvement

December 14, 2016

Bottom Line: Industrial activity declined modestly in November after rising slightly in October. Utility generation has seen sharp declines in recent months. However, the overall trend is improving modestly. Mining output was a major drag on IP last year (down 11%) but is up 12% and 7% in the last 3- and 6-months, respectively, on an annualized basis. Manufacturing, also a drag last year, is up 1.6% annualized in the last 3 months and 0.8% in the last 6 months. While still not growing, the trend in industrial production is improving slightly.

Industrial Production FELL by 0.4% in November, compared with market expectations for a decline of 0.3%. Output is now 0.6% BELOW its year ago level.

In November, Mining Output ROSE by 1.1%, and is now 4.6% BELOW its year ago level. Utility Generation FELL by 4.4% and is now 1.9% BELOW its year ago level. Manufacturing Output was UNCHANGED and is now 0.1% ABOVE its year ago level. Output in high-tech industries rose by 0.2%. Meanwhile, output in the motor vehicle industry fell by 2.3%. Excluding both the high-tech and motor vehicles industries, industrial output climbed by 0.1%.

Capacity Utilization FELL by 0.4 points to 75.0%, compared with market expectations for a higher decline to 75.1%. Moreover, the prior month was revised from 75.3% to 75.4%. Capacity utilization rate is now 0.7 percentage points below its year ago level and 5.0 percentage points below its long-run (1972–2015) average.

Article by Contingent Macro Advisors