Utilities Drove December Industrial Production Higher

January 14th, 2011
in econ_news

Econintersect:  The Federal Reserve reported a surprisingly large increase in Industrial Production for December.  Industrial production was up 0.8% from November.

Follow up:

The Federal Reserve reported:

Industrial production increased 0.8 percent in December after having risen 0.3 percent in November. The rate of change for industrial production was revised down in November but  revised up in September and October; the net effect of the revisions from July to November left the level of industrial production in November slightly higher than was previously reported. For the fourth quarter as a whole, industrial production increased at an annual rate of 2.4 percent, a slower pace than in the earlier quarters of the year. In the manufacturing sector, output moved up 0.4 percent in December with gains in both durables and nondurables.

Excluding motor vehicles and parts, factory output increased 0.5 percent. The output of mines advanced 0.4 percent; the output of utilities surged 4.3 percent, as unusually cold weather boosted the demand for heating. At 94.9 percent of its 2007 average, total industrial production in December was 5.9 percent above its level of a year earlier. The capacity utilization rate for total industry rose to 76.0 percent, a rate 4.6 percentage points below its average from 1972 to 2009.

Manufacturing contributed 40.5% of the increase and mining 5.1%.  The largest contribution came from utilities, which contributed 54.4%.  More than half of the increased production was probably related, at least in part, to cold weather and Christmas lighting.

In the five months preceeding (July through November) production of utilities actually contracted while manufacturing increased.  Over the twelve month period starting December 2009 manufacturing contributed 79.3% of the Industrial Production gain, mining 17.3% and utilities 3.4%.

The December increase in Industrial Production is distorted by an abnormal amount of production by utilities.    

Sources:  Federal Reserve and Global Economic Intersection ("Thank Weather for Industrial Production Increase in December 2010")

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