Goldman's Take On Industrial Production: Volatility Blamed On Abnormal February Heat

Tyler Durden's picture

From Goldman: "US industrial production increased by 0.8% mom in March, up from a revised 0.1% increase previously. In February, unseasonably warm temperature reduced heating demand and therefore output of utilities. This held back the gain in overall production despite growth elsewhere. This effect reversed in March, leading to strong growth in the index." So between snow, rain, heat, earthquakes, nuclear explosions, oil spills, all of which are of course completely unforeseeable, why do we need economists making "forecasts" again?

From Jan Haztius, who is desperately seeking the best way to break the news about the GDP growth cut.

MAIN POINTS:

1. US industrial production increased by 0.8% mom in March, up from a revised 0.1% increase previously. In February, unseasonably warm temperature reduced heating demand and therefore output of utilities. This held back the gain in overall production despite growth elsewhere. This effect reversed in March, leading to strong growth in the index.

2. Beyond this temporary noise, industrial activity remained quite strong. Output of manufactured products increased by 0.7% mom in March, reflecting gains in both motor vehicle output and other items. Over the last four months, the industrial production index for manufactured products increased by an annualized rate of 9.9% - the fastest four-month pace of increase since the recovery began. In coming months, we will be watching closely for the effect of any supply-chain disruptions resulting from the natural disasters in Japan. But heading into this potential shock, momentum in the sector looks strong.

3. The capacity utilization rate increased to 77.4% in March from 76.9% in February. The level was in line with consensus expectations - despite higher production growth overall - due to revisions to earlier months.