REPEAT: MNI 5 THINGS: Analysts See Continued Gains In US IP

Repeats Story Initially Transmitted at 16:19 GMT May 15/12:19 EST May 15

By Holly Stokes

     WASHINGTON (MNI) - The Industrial Production report for April will be

released Wednesday, with the median forecast among analysts in an MNI survey

calling for a 0.6% gain in industrial production and capacity utilization to see

a rise to 78.4%.

     Ahead of the release, we outline five themes for particular attention. 

--SMALL UPSIDE RISK TO IP

     In the past 20 April reports, analysts have shown a slight tendency to

underestimate industrial production, with 10 underestimates and eight

overestimates over that period, suggesting a small upside risk to the estimate

of 0.6%. Further, the trend of underestimating has continued in recent years,

with underestimates in the last two years.

--EXPECTATIONS FOR CAPACITY UTILIZATION TO EDGE HIGHER

     Analysts expect capacity utilization to continue its upward trend for the

third month in a row, with a median estimate of 78.4% after 78.0% in the

previous month. If correct, this would be the highest reading since February

2015 and suggest a further decrease in slack for the growing economy. However,

analysts do not have a very accurate history of forecasting capacity

utilization, with only one correct estimate in the past ten Aprils. But with

four underestimates and five overestimates, there is no clear directional risk.

--COLD TEMPERATURES TO KEEP UTILITIES UP

     Utilities jumped 3.0% in March, and now analysts wonder if utilities can

continue this upward momentum. Boosting the odds for another gain, this April

was the coldest in 21 years. Given the unusually chilly weather, the demand for

heating was likely higher than seasonal factors expect. However, many analysts

argue that even with the cold weather, the figure should come in softer than

last month's unusual strength from four Nor'easters.

--INCREASE IN MANUFACTURING TRACKS WITH MANUFACTURING HOURS

     After surprising with a modest 0.1% gain in March, the manufacturing sector

is expected to see a healthy rebound in April. The manufacturing sector roughly

tracks with manufacturing weekly hours worked. Consequently, the 0.5% increase

to 41.1 manufacturing hours in the already released April employment report

suggests a gain for manufacturing industrial production.

--ANALYSTS LOOK TO INCREASED RIG COUNTS AS EVIDENCE OF MINING GAINS

     Recent mining performance has been solid, jumping 1.0% in March and only

declining once in the last seven months. Analysts expect mining to continue this

upward trend, seeing April rig count data as a positive sign for mining.

Baker-Hughes rig count data shows that U.S. oil rigs grew to 825 in the month,

its highest level since March 2015. While an increase in rigs should correspond

to increased mining production, recent history shows that there can be

discrepancies between the two.This was the case in January, when increased rig

counts led analysts to overestimate mining production, when it actually

declined.  

--MNI Washington Bureau; +1 202-371-2121; email: holly.stokes@marketnews.com