Wednesday, February 17, 2010

Industrial Production- 2/17/10

Industrial production posted another strong gain for January-but this time the strength was real and not weather related. Industrial production in January advanced 0.9 percent, following a 0.7 percent jump in December. The January was marginally better than the market projection for a 0.8 percent gain.

The manufacturing component made a robust comeback, jumping 1.0 percent after edging down 0.1 percent the month before. For the latest month, utilities output increased 0.7 percent after spiking 6.3 percent in December on atypically cold weather. Mining output rose 0.7 percent after dipping 0.2 percent in December.

A big chunk of the manufacturing spike was due to a jump in auto assemblies-but gains were healthy elsewhere. Motor vehicles & parts jumped a monthly 4.9 percent after a 0.3 percent decline in December. Excluding motor vehicles, manufacturing rebounded 0.8 percent in January, following a 0.1 percent decrease the month before.

Net, industrial production is as strong or stronger than the January headline number but also not as healthy as the December headline figure. Lesson-pay more attention to the manufacturing component than to the headline figure.

On a year-on-year basis, industrial production in January improved to plus 0.9 percent from down 2.2 percent the month before.

These numbers were expected. As I noted in my report on the U.S. economy, Industrial Production is set to surge by a total of 620 basis points yoy for 2010. Equity markets didn't react much to the news. Stocks remain flat near the close with the S&P 500 up only 42 basis points at 1099.51. Will we see a legitimate test of 1100? My Partner Alex will provide some technical analysis on this topic shortly.

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC

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