Industrial production in January was weaker than expected, seeing no change from the 1% drop in December (revised down by 3 tenths). The estimate was for a bounce of .5% off that initial print in December. The main drag was the 10% drop in utility output which I’m guessing has a lot to do with the mild winter so far. Manufacturing was light relative to expectations if we include the December downward revision. Motor vehicle production rose .5% m/o/m after dropping in the two prior months. Machinery production and for computers/electronics both rose after dropping in the prior months. Mining production bounced after 2 months of declines.
Capacity utilization slipped one tenth m/o/m to 78.3% and that is the lowest since September 2021, highlighting the manufacturing recession we’re in. Not including one month last April, the manufacturing component of this index is still below where it was right before the 2018 manufacturing recession that took place, triggered by the China tariffs which disappointingly still exist and that US companies pay for.
Manufacturing Production
Capacity Utilization
The February NAHB home builder sentiment survey rose 7 pts m/o/m to 42. That was 5 pts better than expected but still is below 50. The Present Situation rose 6 pts m/o/m to 46 and the Future Outlook was higher by 11 to just under 50 at 48. The Prospective Buyers Traffic component was higher by 6 pts but is still well under 50 at 29.
Bottom line, the drop in mortgage rates off its highs helped to lift builder sentiment. Also helping has been incentives that builders have employed such as rate buy downs that have brought in buyers. The NAHB did say though that those incentives eased in February as 31% of builders dropped price vs 35% in December. They said the average price decline was 6% vs 8% in December. Also, 57% of builders offered some kind of incentive in February vs 62% in December.
The bigger problem still remains for entry level homes and the delivery of them that first time buyers can afford, especially with a 6%+ mortgage rate. That is something that won’t be easily addressed anytime soon with elevated costs of labor, lots and materials.
NAHB
Buyers Traffic