US industrial production stayed flat in January, while the consensus was looking for a strong 0.7% M/M increase. The previous figure was significantly upwardly revised from 0.4% M/M to 1.0% M/M. The breakdown shows that weakness was based in utilities (-2.5% M/M) and mining (-1.8% M/M), while manufacturing production grew by 0.7% M/M. Within the manufacturing sector, strength was led by motor vehicles and parts (6.8% M/M), but also production of machinery (2.2% M/M) and computers and electronics (1.4% M/M) increased in the first month of the year. Capacity utilization slowed from 78.6% to 78.5%, but manufacturing capacity increased slightly. At first sight, the production data are disappointing, but the underlying picture is not so bad, especially not after the upward revision in the December data. Weakness in utilities is mainly due to the mild winter weather, while manufacturing production continues to grow.
In February, the US Empire State manufacturing index extended its rebound, rising to the highest level since June 2010. The General Business Conditions index jumped from 13.48 to 19.53, while only a moderate increase to 15 was forecasted. The details are rather mixed as only shipments (22.79 from 21.69), delivery time (1.18 from -3.30) and average workweek (7.06 from 6.59) rose slightly, while new orders (9.73 from 13.70), inventories (-4.71 from 6.59), unfilled orders (-7.06 from -5.49) and number of employees (11.76 from 12.09) weakened slightly from the previous month. Also upward price pressures eased as both prices paid (25.88 from 26.37) and prices received (15.29 from 23.08) dropped from the previous month. The further improvement in business sentiment in the NY region is an encouraging sign that the manufacturing sector continues to flourish, but the details suggest that the environment remains challenging.
The NAHB housing market index extended its rebound in February, rising from 25 to 29, while only a marginal increase was expected. Home builders’ sentiment is now at the highest level since May 2007, although remaining poor compared with historical standards. The US housing market is depressed for several years, but for the first time now the NAHB housing market index shows a sustained rebound, suggesting that the US housing market is starting to recover.