US: January industrial production slows - Nomura

US industrial production fell 0.1% m-o-m in January, below the market’s expectation but better than Nomura’s forecast (Nomura: -0.3%, Consensus: 0.2%) and December industrial production was revised down to a 0.4% m-o-m increase (previously 0.9%), notes the research team at Nomura.

Key Quotes

“Ex-auto manufacturing output was flat, weaker than we expected, following a 0.1% decline in December. The underlying component industries showed mixed performances. Production of machinery was up 0.6% and that of computer and electronics was up strongly by 1.3%. However, production for some industry groups, including nonmetallic mineral and plastics and rubber products fell, offsetting gains in other sectors.”

“A positive development was a 0.9% m-o-m gain in business equipment production after a 0.3% decline in December, pointing to a pick-up in equipment investment. On a y-o-y basis, business equipment production continued its strong growth, consistent with recent strength in business equipment investment. Business equipment production has been accelerating since late 2016, driven by increases in industrial and information processing equipment (Figure 1). Looking ahead, we expect the recent tax bill to bolster nonresidential fixed investment in 2018 and 2019.”

“By contrast, mining sector output declined 1.0% m-o-m with all of its major components posting declines, dragging down top-line industrial production. However, mining output was 8.8% higher than its level a year ago. Continued improvement on a 12-month basis appears consistent with ongoing strength in the oil and natural gas sector.”

“The capacity utilization rate fell slightly to 77.5% in January from 77.7% in December (which was revised down from 77.9%). The drop in the utilization rate in January was likely driven by a decline in the rate for the mining sector, which fell 1.4pp to 84.2% (from previous month’s 85.6%), below its long-run average. The manufacturing sector utilization rate was unchanged at 76.2%, 2.1pp below its long-run average. Overall, the total industry utilization rate was still 1.8pp above the level a year ago, which has been improving modestly as output continues to expand.”