A single industrial-output number offered a poor substitute for a sector view in January 2017. In its February 15 release, the Federal Reserve put the seasonally adjusted monthly change at minus 0.3 percent. Yet manufacturing rose 0.2 percent, and within it vehicles and parts fell 2.9 percent while the rest of manufacturing gained 0.5 percent. [g17_20170215]
Electricity and gas utilities introduced another mechanism. Output fell 5.7 percent, largely because unusually warm weather reduced heating demand, the Board said. Mining, by contrast, rose 2.8 percent. For an assessment of where productive activity was changing, a temperature-sensitive utility movement and a vehicle-production decline are not interchangeable evidence of a broad collapse in demand. [g17_20170215]
The January 18 report provides a useful check on that weather narrative and on the baseline. It reported a 6.6 percent December utilities increase, largely attributing it to more normal temperatures after warm November weather. Its initial 0.8 percent estimate of total December output growth became 0.6 percent in the February release. These remain two vintages of one official series, not independent causal tests. [g17_20170215][g17_20170118]
Capacity adds a forward-looking distinction. February's preliminary projection put 2017 total industrial-capacity growth at 1.3 percent from fourth quarter to fourth quarter, after 0.4 percent in 2016. That was a projection, not realized expansion. Our reading is that the sector splits create questions for capital allocation; they do not answer which investment will earn a return or establish changes in prices and profits. [g17_20170215]
Source documents
- Industrial Production and Capacity Utilization - G.17, February 15, 2017https://www.federalreserve.gov/releases/g17/20170215/default.htm
- Industrial Production and Capacity Utilization - G.17, January 18, 2017https://www.federalreserve.gov/releases/g17/20170118/default.htm