Industrial production falls in January, consumer sentiment rises

posted at 2:41 pm on February 15, 2013 by Ed Morrissey

After last quarter’s surprise contraction, a number of voices arose to claim that the -0.1% figure was an anomaly, an artifact of government cutbacks that hid good news on business investment.  Democrats even called it “the best-looking contraction in US GDP you’ll ever see,” and predicted that the business investment in Q4 would pay dividends soon.

And … we’re still waiting:

U.S. industrial production unexpectedly fell in January, weighed down by weak manufacturing and mining, according to a report on Friday that was another sign of slow economic activity at the start of the year.

Industrial production dipped 0.1 percent last month after a revised 0.4 percent gain in December, the Federal Reserve said.

Economists polled by Reuters had expected industrial output to rise 0.2 percent in January. The report comes on the heels of data this week showing retail sales growth slowed in January as households adjusted to higher taxes.

Actually, that’s an interesting point.  Based on January sales figures from higher-end retailers, I argued a week ago that the expiration of the payroll-tax holiday was as depressive as the stimulus had been stimulating — which is to say, not at all — as retail sales rose 0.1% in January overall.  Most analysts reported that this was a poor showing and that consumers had pulled out of what should have been better activity.

However, a separate report released today shows consumer sentiment improving despite the expiration of the payroll tax:

U.S. consumer sentiment improved in February, buoyed by signs of increased hiring, though worries heightened about a decline in future income, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s preliminary reading on the overall index of consumer sentiment rose to 76.3 from 73.8 in January, topping economists’ forecasts of 74.8.

Like I argued last week, the payroll tax holiday didn’t stimulate personal-consumable expenditures (PCE), and its expiration didn’t have a notable impact on them, either.

Let’s get back to industrial activity, though, which really did show a slowdown.  The Weekly Standard’s Geoffrey Norman catches the AP putting on its rose-colored glasses:

Economists expect healthier output in 2013, partly because U.S. companies are sitting on large amounts of cash and appear poised to invest some of it in equipment and machinery. Economies in Europe are also healing, and growth in Asia is expected to improve.

They’re correct about manufacturing, which improved more than first thought in Q4, probably enough to push its next estimate closer to a positive 1.0% when the interim report comes out at the end of February.  However, as Norman notes, the AP’s report that “Economies in Europe are healing” is contradicted by this report yesterday from, er … the AP:

Renewed worries about Europe overshadowed an encouraging U.S. jobs report on Thursday, leaving major stock indexes roughly where they started.

Germany’s economy shrank more than expected late last year, and the slowdown in Europe’s largest economy deepened the region’s ongoing recession. That’s a troubling sign for the U.S., because sales to Europe have been a boon for American companies. …

After a strong start, the stock market has drifted sideways over the previous week with few major events to sway investors. That calm could disappear soon, said Doug Cote, chief market strategist at ING U.S. Investment Management.

With recessions in Europe and Japan, and weak growth in the U.S., he’s bracing for some turbulence. “Everybody is too complacent,” Cote said.

The “encouraging jobs report” was the weekly initial jobless claims level, which dropped into the 340K range.  That is good news, but it’s a volatile series and not one that correlates particularly well on a week-by-week basis with the state of the economy.

With demand slackening in Europe, don’t expect US industrial activity to pick up significantly in the near future.  The burst of activity in the last two months of 2012 may well have expanded inventories without final sales going up appreciably, which means more discounting and less demand in the next couple of months.


Related Posts:

Breaking on Hot Air

Blowback

Note from Hot Air management: This section is for comments from Hot Air's community of registered readers. Please don't assume that Hot Air management agrees with or otherwise endorses any particular comment just because we let it stand. A reminder: Anyone who fails to comply with our terms of use may lose their posting privilege.

Trackbacks/Pings

Trackback URL

Comments

Ed, to your point about retail sales: WalMart has laid an egg:

Wal-Mart shares are plunging as the firm reports a ‘total disaster’ in its February sales. Bloomberg obtained internal emails that note:

“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales. “The worst start to a month I have seen in my ~7 years with the company…. That points to our competitive landscape, which means everyone is suffering and probably worse than we are”

It gets better:

“We have to fight against the tougher economic environment to earn a bigger share of a smaller consumer spending pie

Weight of Glory on February 15, 2013 at 2:44 PM

The “encouraging jobs report” was the weekly initial jobless claims level, which dropped into the 340K range. That is good news, but it’s a volatile series and not one that correlates particularly well on a week-by-week basis with the state of the economy.

Just wait until March when sequestration hits.

Happy Nomad on February 15, 2013 at 2:47 PM

Re: Walmart*
We no longer shop there. We are not the only ones.

Mr. Arrogant on February 15, 2013 at 2:50 PM

Anecdotal but the local Wal-mart Supercenter is down big time in sales and has cut back hours by 30%+. Consumers may have credit card bill shock from Christmas.

Vince on February 15, 2013 at 2:51 PM

Obama has got to work harder!!!
Just give him some more time!!!

Electrongod on February 15, 2013 at 2:55 PM

Manufacturing in the obamba economy:
1. Cooking hamburgers
2. Designing donuts
3. Building parking lots for govt. offices.
4. Budling more roads for peopel who can’t afford cars.
5. Const. of obama phone factories.
6. Global warming prevention design

rodguy911 on February 15, 2013 at 2:55 PM

Keep voting democrat! Utopia is round the corner!

tom daschle concerned on February 15, 2013 at 2:56 PM

Anecdotal but the local Wal-mart Supercenter is down big time in sales and has cut back hours by 30%+. Consumers may have credit card bill shock from Christmas.

Vince on February 15, 2013 at 2:51 PM

http://www.bloomberg.com/news/2013-02-15/wal-mart-executives-sweat-slow-february-start-in-e-mails.html

Wal-Mart is just reflecting the economy at large. The payroll tax holiday ending, gas prices at a record high for February, and unemployment still high. Gee, I wonder why sales would be down.

Doughboy on February 15, 2013 at 2:56 PM

Obama:

We can solve this by more income redistribution….

Oil Can on February 15, 2013 at 2:58 PM

…just keep voting the same clowns in!
../what until all the low information voters finally get a slap in the brain!

KOOLAID2 on February 15, 2013 at 2:59 PM

…wait

KOOLAID2 on February 15, 2013 at 2:59 PM

Obama has got to work harder!!!
Just give him some more time!!!

Electrongod on February 15, 2013 at 2:55 PM

He needs a new laser.

RickB on February 15, 2013 at 2:59 PM

Industrial production falls in January, consumer sentiment rises

Proof positive that unemployment is good for America

BobMbx on February 15, 2013 at 3:02 PM

Paul Krugman is furiously typing up another column demanding Obama launch a new space race to “surpass Russia’s GDP’s explosive growth due to their competitive lead in meteorite impacts” …

/no sarcasm intended … Krugman is the twit who lamented the lack of space aliens invading a few years back.

PolAgnostic on February 15, 2013 at 3:04 PM

production down, economy contracting, sentiment up….sounds about right to me. This country deserves everything its gonna get over the next few years. Until the middle class gets whacked good and hard, nothing will change…

RedInMD on February 15, 2013 at 3:04 PM

Economists polled by Reuters had expected industrial output to rise 0.2 percent in January.

Seriously, it’s time to get some new economists.

rbj on February 15, 2013 at 3:05 PM

I’m trying to work up sympathy for Wal-Mart and their awful sales figures after Duh Wun’s re-election.

Let’s see, they threw their weight behind Obamacare and the prog-fascists because they thought it might save them a few bucks on benefits for their employees…even after conservatives had defended them for years against relentless attacks from union thugs, Democrats, and their allies in the press.

Sorry, I have no sympanthy to give, and trust me…I searched deep.
I’ve got plenty of schadenfreude, though.

DRayRaven on February 15, 2013 at 3:06 PM

Obama has got to work harder!!!
Just give him some more time!!!

Electrongod on February 15, 2013 at 2:55 PM

Gladly. How about 25 to life?

Archivarix on February 15, 2013 at 3:06 PM

I just made several significant purchases.

1. rifles sights for my EBR
2. Single point sling mount for my EBR
3. Scope mount for my EBR
4. Rifle sling for my EBR
5. Ammo.

I’m doing my part for manufacturing in this nation. :)

evilned on February 15, 2013 at 3:08 PM

My gas and oil advisor tells me that NYC will be switching over to natural gas in a big way. He expects it to push up the price of natural gas produced in PA and other places, but obviously not NY.

Gov. Cuomo, who can’t punch his way out of a paper bag, is still sitting on the scientific advisory panel report saying that “fracking” is good. He’s afraid that his friends will abandon him if he brings wealth and prosperity to New York.

Andrew Cuomo, “Fracking Idiot”

J_Crater on February 15, 2013 at 3:17 PM

However, a separate report released today shows consumer sentiment improving

In other news, consumer sentience continues to fall.

Marcola on February 15, 2013 at 3:22 PM

Do you really think that an avrage pay check is losing $ 100 a month due to increase in social security tax and people are going to spend more?… Get real folks… Consumer confidence up… total BS….

mnjg on February 15, 2013 at 3:53 PM

It’s funny, but I’m actually having one of the best months I’ve had in quite a while. But, my business is really niche, so it probably doesn’t mean anything.

trigon on February 15, 2013 at 5:05 PM

The last check from the Arizona State Retirement System used the tax table supplied by the IRS in December, which was for the Bush tax cuts for the “rich” going away. All the retirees found out that they were rich because their withholding increased. I wonder who else had this problem.

Jasper61 on February 15, 2013 at 5:31 PM

The Industrial Production number was a bummer, but it was made up for by the unexpected strength in consumer confidence and the Empire Manufacturing Index (which busted through 10, well above the consensus -1.75). We’ll take it … By the way, the big drop in the trade deficit numbers for December (announced last week) probably means that when the 4Q12 GDP revision is announced in a couple of weeks, it will be positive again. We’re guessing around 0.5% … Dow continues to consolidate around 14K … so far, the numbers for 2013 have been pretty good, so the rally may resume after a breather (or a correction – always welcome) … keep calm and carry on ….

TouchdownBuddha on February 15, 2013 at 6:22 PM

Our woes hit in 2009, but with a lead up in 2008.

The last depression started in 1929, with a lead up in 1928.

The GD lasted through the 1930′s.

The Obama Depression will last through the 2018′s when WWIV happens.

“Drink!”

Bulletchaser on February 15, 2013 at 6:28 PM