17 Feb 2016
US: Interim recovery in industrial production - Commerzbank
Dr.Christoph Balz, Research Analyst at Commerzbank, suggests that for the first time in a long while, the US industrial sector probably cranked up output in January.
Key Quotes
“But this does not really mark a trend change just yet. At the same time, inflation pressure remains low in the US. Only twice in the last 12 months did US industrial production rise versus the previous month. Figures for January are therefore likely to attract attention, because an increase of 0.4% relative to December seems to be on the cards (consensus: 0.3%).
A risk lies in the hard to-calculate effects of the violent winter storm which hit the northeast at the end of the month. We have therefore already lowered our forecast by one tenth. But part of the production increase is due to the fact that temperatures fell after a mild December, with energy needs for air conditioning and heating rising more strongly than usual in January. In contrast, output in the mining sector, which is suffering from falling commodities prices, probably declined once again.
For this reason a rise in January would not mark a trend change to the upside, especially as the environment for manufacturing remains difficult, due to the strong dollar and sluggish global demand. But at least the report on industrial production could assuage the currently rampant fears of a collapse of the US economy.
Those who are betting on an increase in US inflation may be disappointed next week, though.
With petrol prices having dropped sharply in January, it is likely that consumer prices fell by 0.2% on December (consensus: -0.1%). An even weightier factor is that core inflation excluding energy and food probably printed at only 0.1% month-on-month (consensus: 0.2%).”
Key Quotes
“But this does not really mark a trend change just yet. At the same time, inflation pressure remains low in the US. Only twice in the last 12 months did US industrial production rise versus the previous month. Figures for January are therefore likely to attract attention, because an increase of 0.4% relative to December seems to be on the cards (consensus: 0.3%).
A risk lies in the hard to-calculate effects of the violent winter storm which hit the northeast at the end of the month. We have therefore already lowered our forecast by one tenth. But part of the production increase is due to the fact that temperatures fell after a mild December, with energy needs for air conditioning and heating rising more strongly than usual in January. In contrast, output in the mining sector, which is suffering from falling commodities prices, probably declined once again.
For this reason a rise in January would not mark a trend change to the upside, especially as the environment for manufacturing remains difficult, due to the strong dollar and sluggish global demand. But at least the report on industrial production could assuage the currently rampant fears of a collapse of the US economy.
Those who are betting on an increase in US inflation may be disappointed next week, though.
With petrol prices having dropped sharply in January, it is likely that consumer prices fell by 0.2% on December (consensus: -0.1%). An even weightier factor is that core inflation excluding energy and food probably printed at only 0.1% month-on-month (consensus: 0.2%).”