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Industrial Production:  Utilities Drive Strong December, Underlying Trend Solid

January 17, 2018

Bottom Line: With strong upward revisions to October data and utility-led gains in December, industrial production in Q4 increased at an annual rate of 8.2%, sharply faster than in Q3. Despite negative revisions to November data, Industrial output growth is now growing modestly on a year-over-year basis. Trends in manufacturing outside of autos and high tech sectors show accelerating growth. Capacity utilization rates are still below levels seen in 2014 but accelerated sharply in the 4th Quarter. Overall, trends in IP are solid even with less positive trends in vehicle and high tech production.

Industrial Production ROSE by 0.89% in December, compared with market expectations for an increase of 0.5%. The prior month was revised from 0.2% down to -0.1%. But October was revised from 1.2% growth to 1.8% growth. Output is now 3.6% ABOVE its year ago level.

  • In December, Mining Output ROSE by 1.6%, and is now 11.5% ABOVE its year ago level.
  • Utility Generation ROSE by 5.7% and is now 1.8% ABOVE its year ago level.
  • Manufacturing Output ROSE by 0.1% and is now 2.3% ABOVE its year ago level.
  • Output in high-tech industries rose by 0.4%.
  • Meanwhile, output in the motor vehicle industry rose by 2.0%.
  • Excluding both the high-tech and motor vehicles industries, industrial output was unchanged.

Capacity Utilization ROSE by 0.7 points to 77.9%, compared with market expectations for a smaller increase to 77.4%. Moreover, the prior month was revised from 77.0% to 77.2%. Capacity utilization rate is now 1.9 percentage points above its year ago level and 2.1 percentage points below its long-run (1972–2015) average.

Article by Contingent Macro Advisors