Industrial production in February was unchanged m/o/m vs the estimate of up .2% but because January was revised up by two tenths we can call it in line. The amazingly mild winter has caused a sharp decline in utility output which has impacted the headline figure. Manufacturing production rose .5% as expected but off a better than expected base as January was revised up by 3 tenths. The y/o/y gain though is still a very modest 1.2%. Motor vehicle production grew by .8% after falling by .8% in January and the y/o/y rise is 2.6%. The production of machinery and computer/electronics also improved. Also, mining production is finally lifting its head off the ground with a 2nd straight 2%+ m/o/m rise and brings the y/o/y gain to 1.8%. Higher commodity prices are the obvious reason.
Capacity utilization for manufacturing did improve to 75.6% from 75.3% and that is the best since August 2015 but still remains below its long term average of around 80%. This also helps to explain why capital spending still remains modest and may continue to be so notwithstanding all the incentives hopefully coming to improve it. Here is a long term chart on this:
Bottom line, manufacturing production is at the best level in this expansion with the gains seen in January and February but we still have more progress to make to get back to the 2008 peak which is still about 5% higher. I do believe we’ll see some inventory builds in Q2 which the manufacturing PMI’s are hinting at which will help Q2 GDP rebound from what is likely a still punk Q1.
Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor.