Manufacturing Healthy, Capacity Utilization Just Back to Average Levels

- The Empire Manufacturing Index for January fell to 20.1 versus estimates of 21.0 and a reading of 26.3 in December.
- Industrial Production for December rose .6% versus estimates of a .5% increase and a .8% rise in November.
- Capacity Utilization for December rose to 80.7% versus estimates of 80.5% and a reading of 80.3% in November.

BOTTOM LINE: Manufacturing growth in NY state slowed from the fastest pace in a year in January, Bloomberg reported. The optimism outlook component of the index rose to 47.6 from 44.1 the prior month. The employment component of the index increased to 11.3 from 5.0 in December. The prices paid component of the index fell to 46.6 from 46.7 the prior month. I continue to expect manufacturing to add to US growth over the intermediate-term as corporate spending accelerates and inventories are rebuilt.

US industrial production rose for a third straight month in December and factories ran at the fastest pace in more than five years, Bloomberg reported. During the bubble years, the US generated massive overcapacity. Capacity utilization is just now back to its long-term average of 80.7%. I do not expect capacity utilization to rise to an extent that would generate substantial inflationary pressures. Industrial production should remain relatively strong over the intermediate-term.