Main takeaways:
  • Industrial production rose 0.9%mom in January (above mkt consensus), but December decline was revised even lower to -0.7%mom (from -0.4%).
  • Non-energy IP rose 0.5% and core manufacturing increased 0.3% in January.
  • Weakness in oil sector and strong dollar remain a concern for industry activity.

The table below compares total IP, Manufacturing production, Core manufacturing and IP excluding energy. All have been weak in recent months, but the energy sector has had a material negative impact on total industrial activity. Excluding energy, one can see a slowdown in production since late 2014 -- but the overall picture still seems aligned with the weak trend growth observed since 2010.

Production level and growth rates
Capacity utilization


What about the upcoming months? Can we expect any improvement?

The Markit PMI has converged to the (weak) ISM, and both suggest there's no upside for industry in the near term.

A simple linear regression with the ISM makes this point clear.

The Conference Board leading indicators are also catching down with weak industrial activity.

The diffusion index of industrial production tends to lead actual production by a few months, and it shows a tentatively better picture for IP.

Weakness in the oil sector and USD strengthening continue to weight on industrial activity.