December 2020 Headline Industrial Production Improves But Remains In Contraction

The headlines say seasonally adjusted Industrial Production (IP) improved month-over-month - but remains in contraction year-over-year. Our analysis shows the three-month rolling average improved.

Analyst Opinion of Industrial Production

The best way to view this is the 3-month rolling averages which improved.

Industrial production advanced 1.6 percent in December, with gains of 0.9 percent for manufacturing, 1.6 percent for mining, and 6.2 percent for utilities. The increase for utilities resulted from a rebound in demand for heating after unseasonably warm weather in November. For the fourth quarter as a whole, total industrial production rose at an annual rate of 8.4 percent. At 105.7 percent of its 2012 average, total industrial production in December was 3.6 percent lower than it was a year earlier and 3.3 percent below its pre-pandemic February reading. Capacity utilization for the industrial sector rose 1.1 percentage points in December to 74.5 percent, a rate that is 5.3 percentage points below its long-run (1972-2019) average.

Note that manufacturing is in contraction year-over-year - and capacity utilization has returned to contraction year-over-year.

Consider this report slightly better than last month.

The rate of year-over-year growth for manufacturing employment and manufacturing production correlates.

  • The headline seasonally adjusted Industrial Production (IP) was up 1.6 % month-over-month and down 3.6 % year-over-year (YoY was published as -5.5 % last month).
  • Econintersect's analysis using the unadjusted data is that IP growth showed an acceleration in the rate of growth of 2.0 % month-over-month, and is down 3.6 % year-over-year.
  • The unadjusted 3-month rolling average year-over-year rate of growth accelerated 1.1 % from last month and is down 4.8 % year-over-year.
  • The market was expecting (from Econoday):
Headline Seasonally Adjusted Consensus Range Consensus Actual
IP (month over month change) 0.1 % to 0.7 % 0.4 % +1.6 %
IP Subindex Manufacturing (month over month change) 0.2 % to 0.6 % 0.3 % +0.9 %
Capacity Utilization 73.0 % to 73.9 % 73.5 % 74.5 %
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