US industrial production grows in January on strong rebound in utilities output

The US industrial output grew 0.9% m/m in January, as compared with the decline of 0.7% m/m in December. The January's rebound was primarily because of a weather-related snap back in utilities output. In January, manufacturing output grew strongly by 0.5% m/m, on par with Capital Economics' projections based on the already reported sharp increase in manufacturing employees' hours of work. In the past year, manufacturing output rose 1.2% and is not likely to rebound much for some time.

Global demand continues to be weak, and even if the US dollar has declined somewhat in the last three weeks, it is still up by nearly 20% in the past 18 months. January's mining output remained the same. The weakness from mining investment should decline by H1 2016. Else, the 0.3% m/m recovery in business equipment production implies that business equipment investment is recovery in Q1. Utilities output grew 5.4% m/m, on par with expectations.

The big recovery is mainly due because temperatures in the Northeast returned to more normal levels in January after a record warm December. The major rebound in utilities output and January's 0.6% m/m rebound in underlying retail sales indicate towards a major increase in real consumption in January.