March 17, 2023

Industrial production was unchanged in February after having risen 0.3% in  January.    In the past year production has declined 0.2%.

Breaking industrial production down into its three basis categories — manufacturing, mining, and utilities –the Fed reported that manufacturing production rose 0.1% in February after climbing 1.3% in January.  In the past year manufacturing output has declined 1.0%.

Growth in orders has slowed in recent months which has created an opportunity for production to catch up.  The manufacturing sector no longer has to deal with supply constraints as suppliers are actually able to provide faster deliveries in the past couple of months for the first time in years.

Automobile production fell 0.3% in February after having risen 0.6% in January.  In the past year motor vehicle production has risen 10.8%, but it has been essentially unchanged for the past ten months.

High tech production fell 0.6% in February.  However, there were huge downward revisions to the December and January data.  For example, in January the Fed previously reported that high tech production declined 0.1%.  Now it says that such production declined 4.9%,  In December the Fed previously said high tech production declined 1.6%.  It now stands at a decline of 5.6%.  In the past year, after revision, high tech production has declined 11.6%.  The high tech production data now seem to square better with the huge layoffs reported by a number of firms in the industry in recent months.

Mining (14%) output fell 0.6% in February after rising 2.0% in January.  Mining has risen 7.1% in the past year.  The earlier strength in the mining component was being driven by the demand for oil following the outbreak of war between Ukraine and Russia.  Indeed, drilling activity has increased 21.5% in the past year, but it has fallen off sharply in the past four months.  One of the ongoing problems is the administration’s dislike for the fossil fuel industry and its efforts to, essentially, drive it out of business in favor of more environmentally friendly means of production.  Oil production is steady at 12.3 million barrels per day and remains well below the level of output that existed prior to the recession.

Utilities output rose 0.5% in February after having plunged 10.1% in January as warm weather allowed us to use less energy to heat our homes in that month.  Over the past year utility output has declined 7.6%.  This component is extremely volatile from month-to-month as the weather fluctuates.

Capacity utilization in the manufacturing sector was unchanged in February at 77.6% after having risen 0.9% in January.   It remains roughly in line with the 77.4% level that is generally regarded as effective full capacity utilization.

GDP appears to be on track for a 2.0% increase in the first quarter.  We expect it to grow at a 1.5% pace in 2023 as real interest rates remain negative through the middle of that year, firms keep hiring at a rapid pace, the unemployment rate rises only slightly from a near 50-year low of 3.6%, and as the housing sector begins to rebound.

Stephen Slifer


Charleston, SC