Industrial Production Declines Slightly As Manufacturing Softens

Industrial production missed expectations in January, falling by -0.1% M/M (0.2% cons), alongside December's figures being revised downward to 0.0% (vs +0.1% unrevised).

• This left overall industrial production flat on a Y/Y basis. An annualized 3M/3M rate shows a slightly more positive impulse, though, at +0.8%, up from -3.1% for the three months prior.
• The report was on the soft side, with weakness in the manufacturing sector particularly noteworthy, but the typical volatility in the underlying data means that it shouldn't move the needle much for the broader economic assessment. Surveys (including the MNI Chicago PMI) had already suggested that while manufacturing activity in January was contractionary, it marked an improvement from 2023 lows.
• Indeed, manufacturing production drove the overall IP decrease, coming in at -0.5% M/M (vs +0.1% prior), a three-month low, with non-durable manufacturing behind the move at -1.1% M/M (vs +0.3% prior).
• Utilities jumped +6.0% M/M, more then making up for December's weak -1.7%, with the highest increase since March 2023, driven in particular by natural gas utilities (+13.9% M/M vs -6.2% prior). Note that the utilities series is highly volatile.
• Potentially pointing to easing price pressures amid subdued activity was capacity utilization which came in at 78.5% (vs 78.7% prior), continuing its recent downtrend, printing its lowest value since September 2021, and being 1.1 percentage points below its long-run average.