Industrial Production Dives, Wiping Out A Strong December And Then Some

December industrial production looked too good to be true, and it was.

Before diving into today's disaster, let's recap last month.

On January 18, I noted Motor Vehicle Production Index Hits New Record High in December.

Spotlight on Motor Vehicles and Parts

The 4.7% jump increase in motor vehicles and parts sure does not match auto sales reports from the manufacturers.

Was there a sudden jump in auto sales in December? We cannot tie industrial production numbers back to retail sales because that report is delayed.

Note that US Auto Overcapacity is 10 Plants 20,000 Direct Jobs.

Ford reported that its sales for December were down 9%. Ford's fleet sales and car sales both cratered, falling well into the double digits, or -19.5% and -27.8%, respectively. Ford followed GM by halting monthly sales reports.

Industrial production revisions seem likely.

Industrial Production January

Please consider the Federal Reserve's Industrial Production Report for January.

Econoday has a good synopsis, bout on the rosy side as always.

A downside manufacturing reversal from an oversized December gain pulled down industrial production volumes by a sharp 0.6 percent in January which is outside Econoday's low estimate. Manufacturing production fell 0.9 percent after rising a revised 0.8 percent in December.

Vehicle production has been behind much of manufacturing's two months of swings, falling 8.8 percent in January after rising 4.3 percent in December. But business equipment, falling 1.5 percent after December's 0.9 percent gain, has also contributed to the volatility.

Utilities, up 0.4 percent, helped limit the weakness in today's report while mining was only marginally positive, at 0.1 percent. But mining is still the standout component as year-on-year volumes in the sector are up 15.3 percent. This dwarfs manufacturing's yearly rate of 2.9 percent which, because it excludes price effects, is deceptively low. When including inflation, manufacturing is running in the mid-single digits which is a healthy and welcome rate of growth.

But this report isn't as bad as it looks and averaging December and January together points to modest but still positive activity for the industrial sector. Nevertheless recent economic indications -- outside of the labor market which remains very strong -- have been moderating and pointing to easing momentum early in 2019.

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