Manufacturing Production Soared in December

Production at American factories boomed in December.

Output at U.S. factories grew 1.1 percent last month, the Federal Reserve said Friday. Economists had expected industrial production to be flat to barely rising. Compared with a year ago, industrial production rose 4 percent in December.

Vehicle production jumped 4.7 percent in the month, boosted by demand for light trucks. Compared with a year ago, vehicle production is up 7.8 percent.

Construction supplies production rose 1.6 percent.

Business equipment production was up 0.5 percent, which is a good indicator that U.S. businesses continued to invest in expansion despite the rocky performance of the stock market in December. For the year, this is up 5.0 percent.

Factory output accounts for about 75 percent of overall industrial output, which rose 0.3 percent for the month. That was in line with the forecast. On an annual basis, total industrial production rose 4.0 percent, much higher than 2.9 percent in 2017 and  2016’s paltry 0.5 percent gain.

Mining production rose 1.5 percent, a sharp and unexpected increase.  Production at utilities fell 6.3 percent, likely because December was unseasonably warm in much of the country.

Capacity utilization, which measures actual production against what factories could potentially produce, rose by 0.1 percent to 78.7 percent. Economists had predicted a slight decline.
The jump in factory output indicates that tariffs on steel and aluminum are not weighing on the U.S. as much as critics claimed they would. And the new tariffs on Chinese products, combined with tax cuts, appear to be encouraging domestic manufacturers to expand production.

The December industrial production numbers indicate that earlier anecdotal reports and surveys that suggested a manufacturing slowdown were offbase.