December 2017 Industrial Production

America’s output of physically made goods improved 0.9 percent in December 2017 according to the Industrial Production figures from the Federal Reserve.  This strong uptick followed the downwardly revised count of 0.1 percent in November (originally up 0.2 percent).  Versus twelve months earlier, this indicator is 3.6 percent higher.

All three major industry groups improved as last year came to a close.  Manufacturing squeezed out a final increase of just 0.1 percent, slowing from 0.2 percent a month earlier.  Because of a strong showing in October (an increase of 1.5 percent), manufacturing output grew at a 7.6 percent annualized rate in the final three months of last year.  Mining pulled out a 1.6 percent improvement following 0.1 percent in November; this uptick is due primarily to gains in oil and gas extractions.  Finally, utilities surged 5.6 percent, more than making up its previous 3.6 percent decline.  Manufacturing, mining, and utilities improved 2.4 percent, 11.5 percent, and 1.8 percent respectively versus a year ago.

Capacity utilization rose on both a monthly and yearly basis.  America used 77.9 percent, an improvement compared to November’s 77.2 percent tally.  For some context, the ratio was 76.0 percent a year earlier.  Additionally, the nation’s capacity grew 1.1 percent in 2017, making the annual increase in utilization that much more impressive.  Nonetheless, our nation continues using less of its potential than the  average from 1972 through 2016 of 79.9 percent 

Industrial production continues suggesting the American economy is expanding, but one major industry group is showing some caution.  While the pace of manufacturing’s improvement was light in the last two months of the year, the direction remains positive.  However, manufacturing tends to move along the contours of the business cycle, so Atlas will keep an eye on this portion of industrial production in the months ahead to make sure it is not starting to signal weakness in the economy.