February 17, 2021

Industrial production climbed 0.9% in January after jumping 1.3% in December.  It has risen steadily every month since reaching a low point in April of last year.  The nation’s production sector continues to recover.  However, as shown below, production has declined 1.8% in the past year and is still 1.9% below where it was in February — prior to the recession.

Breaking industrial production down into its three major sub-components,  the Fed indicated that manufacturing production (which represents 75% of the index) rose1.0% in January after climbing 0.9% in December.  This series has declined 1.0% in the past year and remains 1.0% below where it was in February.

High tech production was hit less sharply than most other sectors of the economy as business people turned to technology to help them cope with the fallout from the virus.  As a result high tech fell only slightly during the recession, and has now surpassed its pre-recession high.  In the past year high tech production has risen 6.8%.  High tech spending helped the economy out of the recession.  It is also going to help businesses adapt to the new economy that is still evolving.

Mining (14%) output jumped 2.3% in January after rising 0.7% in December.  Mining has fallen 11.5% in the past year.

Part of the drop in mining last year was attributable to oil and gas well drilling which plunged in the spring.    As economic activity collapsed in response to the global shutdown caused by the corona virus, the demand for oil plunged and prices fell from $63 at the end of last year to a brief low of about $13 per barrel before rebounding to $60 per barrel currently.  The increase in oil prices has caused drillers to boost the pace of production but drilling remains 50.5% below where it was last year at this time.

Utilities output declined by 1.2% in January after having risen 4.9% in December.  Over the past year utility output has risen 6.6%.

Capacity utilization in the manufacturing sector rose 0.7% in January to 74.6% after rising 0.7% in December.  It is now about 4 percentage points below its long term average.

GDP declined 2.5% in 2020.  However, the vaccines are being distributed and the pace seems to be accelerating.  At the same time the rate of spread of the virus is slowing dramatically.  Then there was a $900 billion fiscal stimulus package passed at the end of last year with an additional $1.9 trillion stimulus package in the works.  That should boost GDP growth for 2021 to 6.2%.

Stephen Slifer

NumberNomics

Charleston, SC