US industrial production hit by slump in mining & utilities

The 0.4% m/m contraction in December's industrial production was principally due to a weather-related 2.0% m/m decline in utilities output and a 0.8% m/m fall in mining output. Over the fourth quarter as a whole, the unseasonably warm weather in the Northeast generated a massive 9% decline in utilities output. The ongoing slump in energy prices resulted in a 5% fall in mining output.

Although the ISM manufacturing index is now well below the 50 mark, actual manufacturing output continues to hold up quite well. It contracted by 0.1% m/m in December specifically, but was largely unchanged over the second half of last year and increased by 0.8% in 2015 as a whole.

The weather may have helped a little, however, with construction supplies output rising by 0.6% m/m last month. Motor vehicle output fell by 1.7% m/m in December, following a 1.5% m/m drop in November, illustrating that the run of strong sales and production in vehicles has faded.

Overall, with the dollar still rising at a rapid pace and global demand clearly pretty weak we don't expect much from the US manufacturing sector this year. In terms of actual employment and output, manufacturing is still "close to" rather than "in" recession. But it wouldn't be surprising if both contracted modestly over the first half of this year. Nevertheless, despite the apparent slowdown in fourth quarter GDP growth,

"We still expect the domestic service-based economy to perform well this year and expect GDP growth of 2.5% for 2016",says Capital economics in a research note.