After last month's surge in industrial production by a revised 1.0%, driven by a 3% jump in Utilities production, December promptly cut to a lower gear rising at just 0.3%, in line with expectations, as Utilities offset last month's surge, falling by 1.4% even though December weather was, last we checked, far more "eventful" (to borrow UPS' term) than November. Factory production also rose at a slower pace, increasing 0.6% compared to the 0.4% in November, while Mining cut its growth pace by more than half, increasing by 0.8% compared to 1.9% in November.
The most notable number in today's Industrial production report was the update of Capacity Utilization, which rose once again from 79.1% to 79.2%, 10 basis point higher than expectations. This was also the highest Cap Utilization print since May 2008 and makes a further case that the economic cycle is in its late stages and that slack, contrary to what economists are repeatedly, and incorrectly, claiming is rapidly dropping to the point where it is indeed time to start thinking about the arrival of the next dreaded "R" word.
From the report:
Manufacturing output moved up 0.4 percent in December, its fifth consecutive monthly increase, and rose at an annual rate of 6.2 percent in the fourth quarter. In December, the index remained 3.1 percent below its peak in December 2007. The factory operating rate in December was 77.2 percent, a rate 1.5 percentage points below its long-run average.
The production of durable goods edged up 0.1 percent in December. The largest gains—about 1 1/2 percent—were posted by primary metals; electrical equipment, appliances, and components; and motor vehicles and parts. The largest declines—around 2 percent—were recorded by wood products and by machinery. For the fourth quarter, the output of durable manufacturing moved up at an annual rate of 8.8 percent, as the indexes for all of its major categories increased. In December, capacity utilization for durable manufacturing was 77.4 percent, a rate 0.4 percentage point above its long-run average.
The output of nondurable goods increased 0.9 percent in December. All of its major categories except textile and product mills posted gains. For the fourth quarter, the index for nondurable manufacturing rose at an annual rate of 4.1 percent, with gains widespread among its major categories. The utilization rate for nondurable manufacturing jumped 0.6 percentage point to 78.3 percent in December, but it remained 2.4 percentage points below its long-run average.
Production in the non-NAICS manufacturing industries (logging and publishing) moved up 0.5 percent in December after having declined in the previous two months. Relative to its year-earlier level, output contracted 2.1 percent.
In December, production of mines advanced 0.8 percent, and capacity utilization moved up 0.3 percentage point to 90.2 percent, a rate 2.9 percentage points above its long-run average. The index for utilities dropped 1.4 percent, and the operating rate fell 1.2 percentage points to 80.1 percent, a rate 6.1 percentage points below its long-run average. For the fourth quarter, the output of utilities rose at an annual rate of 18.6 percent after having declined 6.4 percent in the third quarter.
And on Cap U:
Capacity utilization rates in December for industries grouped by stage of process were as follows: At the crude stage, utilization increased 0.3 percentage point to 88.7 percent, a rate 2.4 percentage points above its long-run average; at the primary and semifinished stages, utilization was unchanged at 77.9 percent, a rate 3.1 percentage points below its long-run average; and at the finished stage, utilization edged up 0.1 percentage point to 76.3 percent, a rate 0.8 percentage point below its long-run average.
Industrial Production charted:
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And the more notable Cap Utilization chart:
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