Macro February 14, 2020 / 02:39 pm UTC

Implications of U.S. January Industrial Production: Positive Excluding Aircraft Decline

By David Sloan

The U.S. January industrial production report looks modestly positive if excluding some special factors, notably a drop in aircraft production. 

Industrial production experienced a 0.3% decline in January while revisions were marginally positive, which was close to the consensus expectation. The 0.1% decline in manufacturing did not surprise either. 

The manufacturing breakdown included a 7.4% decline in aerospace and miscellaneous transportation equipment, as Boeing cut output of the 737 Max, taking out 0.4% of the manufacturing total. Autos, recently volatile due to strike activity in Q4 of last year, saw a strong month in January, with manufacturing output excluding autos down by 0.3%. 

This means that manufacturing output excluding autos and aircraft saw a modest increase, which, after a stronger December, suggests that the underlying trend is stabilizing. The easing of trade tensions is certainly assisting in this development, but the coronavirus poses a threat to this emerging improvement.

Elsewhere in the breakdown, mining saw a second straight increase, which may be difficult to sustain given recent weakness in the oil price. Weakness in utilities outweighed the improved mining numbers, however, as a result of milder-than-usual winter weather.

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