This morning, the Federal Reserve, which embarks on a busy week that includes a two-day meeting to discuss monetary policies, reported that industrial production for the month of November jumped 1.1% after rising just 0.1% in the prior month. The report, along with a favorable reading earlier this month on manufacturing activity from the Institute for Supply Management, an Arizona-based trade group, indicates steady growth in the manufacturing sector. Such data are yet another indication that the U.S. economy is improving and may prompt the central bank to begin cutting back on its accommodative bond-buying program, perhaps as early as this month.
The primary catalysts behind the November outperformance was a 3.9% increase in utilities output. That was a sharp reversal from the 0.3% decline for that category in the prior month. Colder-than-average temperatures boosted demand for heating. Likewise, industrial production in the mining industry rose a healthy 1.7% last month after having declined 1.5% in October, while manufacturing production was up 0.6%. Meantime, capacity utilization rose to 79.0 in November, after a slight dip in the month of October. Overall, for the 12-month period ended November 30th, industrial production and capacity utilization were up 3.2% and 1.8%, respectively.
As noted, the latest improvement in industrial production and capacity utilization indicates that manufacturing activity in the U.S. is strengthening. The uptick in industrial production, along with notable improvements in a few other important sectors of the economy, including the labor market, which added 203,000 new jobs in November, gives more fuel to some of the FOMC voters that have been calling for a scaling back of the central bank’s aggressive $85 billion a month in asset purchases.
All in all, the latest industrial production data were another indication that the U.S. economy is continuing to improve and might be the last piece of data needed to push the scales in favor of the lead bank beginning to step on the monetary brakes.
At the time of this article's writing, the author did not have positions in any of the companies mentioned.