Total Industrial Production rose 0.4% in December, slightly below the 0.5% rise that was expected. In addition, November was revised to a drop of 0.3% from a 0.2% drop. That was offset by an upward revision to 0.7% growth from 0.6% in October. However, the miss was all due to the Utility sector. That simply means that the weather in December was more mild than usual. Factory output soared by 0.9%, more than reversing an unrevised 0.4% drop in November. Year over year total industrial production is up 2.9% while factory production is up 3.9%. Utility output plunged 2.7% on top of a 0.6% decline in November and a 0.2% drop in October. Year over year utility output is down 6.6%. The third major sector tracked, Mining, rose 0.3% on the month, on top of increases of 0.5% in November and 1.6% in October. Year over year Mine output (including oil and natural gas output) is up a very strong 6.5%. Output of final goods was up 0.3% after dropping 0.5% last month but growth of 0.9% in October, and is up 3.2% year over year.
Final output is divided into consumer goods and business equipment. The Business equipment side is bordering on a boom, with growth of 0.8% for the month, after being unchanged in November and up 1.3% in October and is up 9.5% year over year. Consumer goods output on the other hand has been more anemic, up just 0.2% on the month, after falling 0.8% in November and growing 0.7% in October, and has only risen 0.9% year over year.
The same report also showed that total capacity utilization rose to 78.1% from 77.8% in November, and matching October’s level. It is up however from 76.8% a year ago, and the June 2009 low of 67.3%, and is inching back towards its long term average level of 80.4%. December’s level was slightly below the expected level of 78.2%.
However, as with the Industrial Production figures, it was all about the weather. Utility utilization fell to an all time record low (back to 1967) of 76.8%, down from 79.0% in November and 79.6% in October. A year ago it was 83.7% and the long term average is 86.6%. The lowest it ever got in the depths of the Great Recession was 79.2%. Part of the weakness comes from growth of capacity, which was up 1.8% over the last year. The more capacity grows, the harder it is to fill the existing capacity, but capacity growth is still a very good thing.
Factory output on the other hand rose to 75.9% from 75.3% in November and 75.6% in October. That is up from 73.8% a year ago and just 64.4% in June of 2009. It is slowly closing in on its’ long term average level of 79.0%. Factory capacity is also growing, but at a slower 0.9% rate year over year, providing a little bit of a headwind to higher capacity utilization. The nation’s mines are absolutely booming, with capacity utilization fo 92.8% up from 92.6% last month and 92.9% in October and 88.9% a year ago. The long term average is 87.4% and capacity is 2.0% higher than a year ago.
While we were slightly shy of the expectations for both total Industrial Production and Capacity Utilization, this was actually a very strong report. The recovery from the lows of mid 2009 has been extremely strong, and while we are not back up to the long time average levels yet on factory usage, we are getting there. In the meantime, while we are at below average to average levels of factory usage, the threat of rapidly accelerating inflation will remain low. While everyone would like to see a faster recovery than we have had, we are recovering.
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