U.S. industrial production drops in January on fall in mining production

Industrial production in the U.S. fell in the month of January. On a sequential basis, industrial output fell 0.1 percent, as opposed to consensus expectations of a modest rise of 0.2 percent. The print for December was downwardly revised by five-tenths to 0.4 percent, implying slower momentum in production going into the first quarter.

Decline in mining production (-1 percent) mainly drove the fall in the headline figure. Manufacturing production came in flat on the month. In this category, growth in motor vehicle assemblies eased to 0.6 percent from 1.1 percent, consistent with the deceleration in auto sales. This is one subcomponent that would be monitored closely, given the expectation that auto sales are expected to return to lower, more normal levels in the months ahead.

If firms choose to keep lean inventories due to subdued demand, motor vehicle production is expected to remain sluggish for much of the first quarter, noted Barclays in a research report. In the meantime, utilities production decelerated in January as was anticipated, probably on account of better weather conditions.

“Taken together, the PPI and industrial production data lowered our estimate of Q1 GDP tracking by one-tenth, to 2.2 percent after rounding”, added Barclays.

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