A colder-than-normal January pushed industrial production up significantly as utility production rose 9.9% on the month—the highest rate on record—according to a report from the Federal Reserve on Wednesday.
Overall industrial production volume, as a result, advanced by 1.4% in January from a decrease of 0.1% in December. Industrial production remained robust in the first month of the year with the index 2.1% above its pre-pandemic level.
The supply chain bottlenecks stayed somewhat constrained as capacity utilization stayed 1.9% below its long-run average, despite rising 1.0% on the month. The improvement in capacity utilization, however, suggests that we will see our RSM US Supply Chain Index continuing to ease in January from its October peak.
Mining production rose for the fourth month in a row, registering a 1.0% increase, while manufacturing posted a more modest gain of 0.1%. Within manufacturing, durables, miscellaneous manufacturing and machinery posted the largest gains, while motor vehicles and parts, and nonmetallic mineral products posted the largest losses, the Federal Reserve reported.
The impact of the omicron surge might be to blame for some of the production losses in January as it has affected millions of workers across the United States who called in sick.
If that reason holds true, we should expect a sharper rebound of those sectors in February as the surge eases. The seasonal factor because of an unexpectedly cold January, however, will offset some of that rebound.
The takeaway
We expect that the underlying upward trend for the industrial sector will remain intact this year as the economy roars back from the pandemic and as supply bottlenecks continue to fade.
