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Economy in Brief

December Industrial Output Gained, But Vigor Questionable with Downward Revisions
by Tom Moeller & Carol Stone January 17, 2007

Total U.S. industrial production rose 0.4% last month but revisions generally had the effect of lowering the gains in output during the prior two months. Consensus expectations had been for a 0.1% December rise.

Factory sector output rose 0.7% but a November's 0.3% increase was revised to zero. Even so, the strong December brought manufacturing back to within a hairbreadth of its August high.

With a 1.5% (0.1% y/y) increase, production of durable consumer goods added to a slightly revised 1.6% gain in November, recovering further from its October plunge, which was revised lower still to a 2.3% fall. Both automotive products and home electronics had December increases of around 2%.

Nondurable consumer goods output slipped 0.2% (0.8% y/y) a second consecutive monthly decline. November was revised from a 0.1% decrease to -0.4%. Food and energy goods both fell, the former by 0.3% and the latter, 0.8%. Clothing had a nice rebound of 1.4% to partially offset.

Business equipment production jumped 1.6% but both November and October were reduced, November to 0.9% from 1.2% reported before and October, registered a month ago at +0.2%, was trimmed to 0.1%. Output of all major types of equipment -- transit, information processing and industrial -- showed sizable December gains, but the downward revisions, which were the second in a row, leave us a bit cautious about characterizing the overall trend as a vigorous one.

Total industry capacity utilization increased to 81.8% in December from 81.6% in November. This latter period was, however, revised from an initial 81.8% reported last month. Factory sector utilization increased to 80.2% from downwardly revised 79.8% in November and 79.9% in October, both somewhat lower than reported a month ago. Factory sector capacity again rose 0.2%; November's 2.8% y/y gain represents a slight upward revision, but December's yearly increase in capacity eased to 2.7%.

Production & Capacity December November Y/Y 2006 2005 2004
Industrial Production 0.4% -0.1% 3.0% 4.1% 3.2% 2.5%
 Manufacturing (NAICS) 0.7% 0.0% 3.5% 5.0% 4.0% 3.0%
  Consumer Goods 0.2% 0.1% 0.6% 1.3% 2.8% 1.4%
  Business Equipment 1.6% 0.9% 10.4% 11.7% 7.9% 4.3%
Capacity Utilization 81.8% 81.6% 81.3% (12/05) 81.8 80.2% 78.1%
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