Economy Watch: Industrial Production Drops in January

By Dees Stribling, Contributing Editor

The hard winter weather took a bite out of U.S. industrial production in January, according to the Federal Reserve on Friday. Overall industrial production decreased 0.3 percent in January after having experienced a rise of 0.3 percent in December.

Even so, industrial production is more-or-less back to where it was just before the Great Recession, though capacity utilization is still a little anemic. At 101 percent of its 2007 average, total industrial production in January was 2.9 percent above the same month a year earlier. The capacity utilization rate for total industry decreased in January to 78.5 percent, which is 1.6 percentage points below its long-run (1972–2013) average.

Manufacturing output, a subset of industrial protection, fell 0.8 percent in January, “partly because of the severe weather that curtailed production in some regions of the country,” noted the Fed. Utilities’ output rose 4.1 percent in January, as demand for heating was boosted by unseasonably cold temperatures, while the production at mines declined 0.9 percent in January following a gain of 1.8 percent in December.

 Consumer Sentiment Unmoved

The preliminary Reuters/University of Michigan consumer sentiment index for February came in at 81.2, unchanged from January. A dip in the current conditions component of the index, down 2.8 points to 94 — probably because of the recent weather — was offset by improvements in the expectations component, which were up 1.8 points to 73.

The reading for the overall index in February is still fairly high, at least in the post-recession period. During the worst of the economic crisis in 2009 and ’10, the index barely ventured over 70, and often was below 60. The only other period in recent history during which the index was that low was briefly in the early 1980s. During the stronger economic periods in the late ’80s, late ’90s, and mid-00s, the index was usually between 90 and 100.

The University of Michigan’s Consumer Survey Center questions 500 U.S. households each month on their current financial conditions, but also their attitudes about the health and direction of the economy. The metric is generally a good indicator on trends in consumer spending.

On Friday, Wall Street moved upward, with the Dow Jones Industrial Average gaining 126.8 points, or 0.79 percent. The S&P 500 advanced 0.48 percent, but the Nasdaq was up a mere 0.08 percent.