U.S. Industrial Production Unexpectedly Fell in January

Total industrial production edged down 0.1% m/m (0.0% y/y) in January following a downwardly revised unchanged reading (previously +0.1% m/m) in December and an upwardly revised 0.3% m/m reading (previously unchanged) in November. A 0.3% m/m increase had been expected by the Action Economics Forecast Survey. The level of total production is essentially unchanged from the fall of 2022. However, interest-sensitive manufacturing output has fallen 2.2% since the fall of 2022, clearly feeling the toll of the Federal Reserve’s aggressive tightening of monetary policy that began in March 2022.

Unseasonably harsh winter weather impacted production in all three of the major industry groups, restraining manufacturing and mining but boosting utilities. Manufacturing production slumped 0.5% m/m (-0.9% y/y), its first decline in three months, following rises of 0.1% m/m in December and 0.4% m/m in November. Mining output plummeted 2.3% m/m (-1.2% y/y), its third decline in the past four months, after an unrevised 0.9% monthly gain in December. By contrast, utilities production was up 6.0% m/m (+9.0% y/y) in January, its largest monthly gain since last March, following a 1.7% m/m decline in December (revised down from -1.0% m/m previously).

In manufacturing, production of durable goods edged up 0.1% m/m (+0.3% y/y) in January, offsetting a 0.1% monthly decline in December. Among durables, the largest gains were recorded in electrical equipment, appliances, and components as well as in aerospace and miscellaneous transportation equipment. Motor vehicle production fell 0.2% m/m in January after solid gains in both November (7.2% m/m) and December (3.2% m/m). By contrast, production of nondurable goods slumped 1.1% m/m (-1.8% y/y), the third decline in the past four months and the largest decline since December 2022. Declines were widespread among nondurables, with notable weather-related decreases in the indexes of petroleum and coal products, chemicals, and plastics and rubber products.

The outsized drop in mining production, the largest since February 2021, reflected a weather-related decline in oil and gas extraction (-1.6% m/m) and a big drop in coal production (-19.2% m/m). The jump in utilities output included a 4.7% m/m rise in electric power generation and 13.9% m/m surge in natural gas output.

The major market groups posted mixed results in January. The index for consumer goods rose by 0.6% m/m (0.4% y/y) with modest gains in its durable and nondurable components. The indexes for business equipment, construction supplies, and business supplies all declined. The index for construction supplies was 4.1% below its year-ago level. Meanwhile, the output of defense and space equipment continued to post solid growth (1.4% m/m) in January and was up 13.4% from a year ago. Materials output decreased 0.4% m/m (+0.5% y/y) in January, as the non-energy component decreased 0.7% m/m, while the energy component edged up 0.1% m/m.

In special aggregates, output of selected high-tech industries rose a solid 1.3% m/m (+19.8 y/y) following a 0.9% monthly gain in December. Manufacturing output excluded selected high-tech production fell 0.6% m/m after rises of 0.1% in December and 0.4% in November. Manufacturing output excluding selected high-tech industries and motor vehicle production also fell 0.6% m/m in January, its fourth consecutive monthly decline and the largest since last March.

Total capacity utilization slipped to 78.5% in January, its lowest level since September 2021, from 78.7% in December. Capacity utilization for manufacturing decreased to 76.6% in January, a rate that is 1.6%-points below its long-run average. The operating rate for mining decreased 2.3%-points to 92.2%, 5.7%-points above its long-run average. The operating rate for utilities moved up 4.0%-points to 74.2%, well below its long-run average of 84.4%.

Industrial production and capacity data are located in Haver’s USECON database. Additional detail on production and capacity utilization can be found in the IP database. The expectations figures come from the AS1REPNA database.