Industrial Production in the US dropped unexpectedly 0.1% in December. Analysts at Wells Fargo explain the decline took place despite indications that wait times are shortening and other signs of initial improvement with the supply chain problem.

Key Quotes: 

“Total industrial production edged slightly lower in December with a 0.1% decline in the last month of the year. Upward revisions to prior month’s data may take some of the sting out of today’s unexpected decline, but the main message is that despite some improvement, manufacturing output is being held down by tangled supply lines like the many ropes of the Lilliputions that held down Gulliver.”

“Manufacturing, which comprises more than three quarters of all output, saw a 0.3% decline, with motor vehicle and parts production down 1.3% in the month. Aside from October, when motor vehicle output had a spurt of growth, this category generally has been a persistent headwind to overall manufacturing.”

“A silver lining in the report was a 0.3% gain in production in high-tech industries like computers, communications equipment, semiconductors and electronics. Not only have some of these categories seen the brunt of strapped supply and output perhaps signals some easing in bottlenecks, but they’re also indicative of broader business investments that can improve productivity.”

“Overall capacity utilization slipped to 76.5% from a downwardly revised 76.6% in November. But capacity varies widely across industries. Capacity utilization of high-technology industries remains lower than the broader economy-wide measure at 75.9% in December.”

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