Utility Output Particularly Strong Due To Cooler Weather
According to the latest Federal Reserve data on industrial production and capacity utilization, factory production rose in the US by 0.9 percent in January, the biggest increase in 14 months. Bloomberg News reported that economists were anticipating on a 0.4 percent increase, meaning the results were better than forecast. Manufacturing output was also up, rising 0.5 percent, beating economists’ forecasts of a 0.2 percent increase. Utility output rose 5.4 percent in response to January’s cold snap and winter weather. The Fed reported that mining production had no change for the month. Factory production was “boosted by the biggest gain in the output of consumer goods since July on increases in both durables and nondurables.” RBC Capital Markets LLC economist Jacob Oubina said, “It looks like we’re getting some stabilization. The commodity-related headwinds to manufacturing are seemingly dissipating.” The AP reported the Fed data “could raise hopes that manufacturing may be stabilizing after output declined for much of last year.” BMG Capital Markets economist Jennifer Lee said, “This encouraging report should help quiet the recession calls of late.” The Wall Street Journal reports analysts said it was not clear yet if the January report was an outlier or an indicator of a broader trend. IHS Global Insight economist Michael Montgomery said, “January was just a good month in a long string of weak or mediocre months, with no assurances that the January performance has any staying power or will not be offset by a weak February.”
What This Means For Small Businesses
The manufacturing sector hasn’t had much to cheer about lately in terms of growth, and this is affecting the optimism of small business owners as reflected in the NFIB’s latest Small Business Economic Trends report. With the report showing declines in expected sales as well as business conditions over the first half of 2016, NFIB Chief Economist William Dunkelberg said, “Overall, it is unlikely that anything will occur that will raise the spirits of small business owners.” However, January’s industrial production data indicate that momentum may finally be building for manufacturing growth this year.
Reuters also covered the story.
Note: this article is intended to keep small business owners up on the latest news. It does not necessarily represent the policy stances of NFIB.