There were two important reports on the U.S. economy released this morning. First, total industrial production in America rose in December by 0.3 percent, according to new data from the Federal Reserve Board of Governors. That was in line with expectations but the November increase was revised slightly lower. Weighing on last month’s headline figure was a 6.3 percent plunge in utilities related to unseasonably warm weather that reduced demand for heating. This weakness, though, was more than offset by solid gains in construction, mining, manufacturing, and motor-vehicle output. Further, capacity utilization, a leading indicator of potential output, climbed in December to the best level since 2015. Altogether this report suggests that factory activity in America is expanding at a much healthier pace than recent survey data would imply.
Elsewhere, consumer confidence softened this month, according to a new report from the University of Michigan. Specifically, the popular sentiment gauge fell from 98.3 to 90.7 in the first half of January, the largest monthly drop in six years, the lowest reading since October 2016, and significantly worse than anticipated. Surveyed Americans’ views of both present and future economic conditions deteriorated this month to levels not seen since the Presidential election. Frustration with the ongoing trade war and partial government shutdown are likely major factors behind the recent decline in optimism because the percentage of consumer respondents making negative comments about government economic policy has jumped to a near-record level that occurred during a previous shutdown. This is a sharp reversal from a year ago when positive comments were at an all-time high following the passage of the tax cuts in Washington. The report’s authors added that “While the January falloff in optimism is certainly consistent with a slowdown in the pace of growth, it does not yet indicate the start of a sustained downturn in economic activity. It is the strength in personal finances that will continue to support consumption expenditures at favorable levels in 2019.”
Sources: Econoday, FRBG, UoM, ZH, Bloomberg, FRBSL
Post author: Charles Couch