US: Colder Weather Boosts December Industrial Production - Nomura

Analysts noted and reviewed today's US IP.

Key quotes:

"Industrial production jumped 0.9% m-o-m in December, exceeding expectations (Consensus: +0.5%, Nomura: +0.6%). Revisions to the prior months were mixed as November was revised down to -0.1% from +0.2% but October was revised up to +1.8% from +1.2%, respectively. Despite the better-than-expected reading, most of the increase in the headline number came from volatile components. In particular, utilities output increased 5.6%, while mining output also showed a steady increase of 1.6%. For utilities, both electricity (+5.6%) and natural gas production (+6.0%) showed strong increases in December, possibly a reflection of more normal weather after an unusually warm November.

Excluding those volatile components, manufacturing output increased just 0.1% m-o-m, indicating that the underlying trend may not have been as strong as the headline number suggests. Among manufacturing industries, motor vehicles and parts output jumped 2.0% m-o-m, but manufacturing excluding motor vehicles and parts declined slightly 0.1% m-o-m. The decline in non-auto manufacturing output indicates some slowdown in manufacturing activity going into 2018. Yesterday, the Empire State Manufacturing Survey reported that the pace of manufacturing output growth appeared to slow somewhat in early January.

Thus, we could see some waning of the recent strong momentum in the industrial sector in coming quarters. GDP tracking update: Utilities output increased more than expected, implying that household energy service consumption may have been greater than we had assumed. However, vehicle assembly data was slightly weaker than expected, implying less auto inventory accumulation. Altogether, we raised our Q4 real GDP tracking estimate 0.1pp to 2.5% q-o-q saar."