US: weather helps lift industrial production in December - Wells Fargo

According to analysts from Wells Fargo, a return to more seasonal wintry weather in December helped lift industrial production in December. They point out that manufacturing output edged higher as well, “even as the drag from the mining sector went away.”

Key Quotes: 

“The headline increase for industrial production in December was stronger than expected. The bigger gain was partly a function of downward revisions to output figures for the prior month but mostly a big boost from utilities. A pick-up in utilities for December was somewhat expected as temperatures returned to normal after a particularly warm autumn.”

“Mining output has been a steady drag on industrial production since oil prices peaked in the middle of 2014, but there was some relief here in December. Mining output was unchanged after declining in three out of the four prior months.”

“Manufacturing output increased 0.2 percent in December after a 0.1 percent decline in the prior month. This category comprises more than 78 percent of all industrial output. There was relatively broad-based participation in the various subcategories of manufacturing output with increases in machinery as well as computers & electronics production. Motor vehicles production increased 1.8 percent, nearly reversing a 1.9 percent drop the month before.”

“There is still plenty of excess capacity in the nation’s mines, factories and power plants. While it is true that utilization jumped 0.6 percentage points to 75.5 percent in December, November marked one of the lowest points for utilization since the economy recovered from the recession.”

“The upshot is that although inflation is firming as we saw in the separately released CPI report earlier today, there will not be much in the way of upward price pressure from the manufacturing sector beyond rising material costs.”