Industrial Production Rises In January; Manufacturing Lags

ByJill Jusko Industrial production leaped forward 0.7% in January, reversing a 0.4% decline in the previous month, according to figures released Feb. 14 by the Federal Reserve. Manufacturing production, which excludes mining and utilities, was slightly less robust with growth of 0.5% in January but still vastly improved from a decline of 0.4% in the prior month. January growth in manufacturing production was led by motor vehicles and parts, which improved by 4.9% following a drop of 5.3% the previous month, and wood products, which grew 2.8% after a .3% gain in December. Machinery improved 1.1%, while computer and electronic products grew 0.9%. The largest declines were registered by petroleum and coal products, which declined 2.5%; electrical equipment, appliances and components (minus computers), down 1.6%; and textiles, which dropped 0.9%. The improved numbers were mostly hailed by Manufacturers Alliance/MAPI, an Arlington, Va.-based business research organization. "The strong increase in January 2003 industrial production confirms that the industrial sector is rebounding from the decline in industrial activity during fourth quarter 2002," said Daniel J. Meckstroth, chief economist for Manufacturers Alliance/MAPI. "A key reason for the strong growth was that the saw-toothed pattern of motor vehicle production spiked in January. Nevertheless, a positive turn in business equipment production and further growth in high-tech information processing equipment contributed to the greater than expected gain." He cautioned, however, "The January report also demonstrates that surging imports continue to take a toll on the manufacturing sector. Industries with high import shares continue to shrink production activity in the United States." The Fed noted other figures that should worry manufacturers as well. Included in its Friday report were preliminary estimates of industrial capacity in 2003. Manufacturing capacity is estimated to be rising 1.3%, better than the 0.9% gain in 2002, the report said. However, it also noted, these gains represent "the slowest-two-year rate of change in the history of the [report] series, which began in 1948." For the month of January, however, manufacturing capacity was 73.7%, slightly higher than the 73.4% of the previous month but below the 75.7% for manufacturing, utilities and mining combined. By comparison, mining capacity in January was 84.8% and utilities capacity was 87.8%. In other economic reports, the Department of Commerce announced that the combined value of distributive trade sales and manufacturers' shipments (excluding semiconductors) for December was estimated at $834.7 billion, up 0.2% from November and up 3.7% from December 2001. Manufacturers' and trade inventories (excluding semiconductors) were estimated at $1,143.4 billion, up 0.6% from November up 1.9% from December 2001.