U.S. industrial production up modestly in November, auto production rises

U.S. industrial production up modestly in November, auto production rises

*U.S. Industrial Production (IP) rose 0.5% m/m following an upwardly revised 1.7% increase in October in the wake of Hurricane Ida. Industrial production is 1% above its pre-pandemic level and has rebounded sharply from its pandemic trough, rising 21.5% since April 2020. November’s data point to the strength of manufacturing activity, with virtually all industry groups experiencing healthy m/m increases, culminating in a 0.7% m/m increase in manufacturing production. IP is likely to continue to rise as supply constraints ease, alleviating parts and distribution bottlenecks that have constrained production, particularly within the auto industry (Chart 1).

*November’s rise in IP was buoyed by a healthy 2.1% m/m increase in motor vehicle and parts production, hot on the heels of a 10.1% rise in October (Chart 2). Combined, these increases have lifted motor vehicle and parts production above its August-September slump, but production remains substantially below pre-pandemic levels. Motor vehicle assemblies have risen to 9.35m annualized, well below the 11.10m in February 2020. Auto assemblies remains 1.2m below its pre-pandemic level on an annualized basis, reflecting a decided shift toward light truck production over the last three months, for which assemblies have risen from 6.37m to 7.64m. As semiconductor shortages ease, we expect sustained growth in auto production to meet strong current demand and replenish severely depleted inventories at the retail level.

*Durable goods manufacturing rose 0.8% m/m and 4.9% yr/yr, in part a reflection of the surge in demand for goods over the course of the pandemic, with durable goods production 2.8% above its level in February 2020 (Chart 3). Industries closely tied to the auto sector all experienced solid m/m production increases, with production of primary metals (+0.5%), fabricated metal products (+0.6%), and primary metals (+0.5%) all rising. Utilities production ticked down 0.8% m/m, reflecting warmer weather that reduced heating demand through November while mining production rose 0.74% m/m. Oil and gas well drilling rose 0.7% m/m after rising 9.3% m/m in October but remains sharply below (22.1%) its pre-pandemic level (Chart 4). Drilling activity has been bolstered by the recovery in energy commodity prices relative to their pre-pandemic troughs and should continue to increase despite regulatory and political opposition.

Chart 1. Industrial Production

Chart 2. Industrial Production – Motor Vehicles and Parts

Chart 3. Industrial Production - Durable Goods Manufacturing

Chart 4. Industrial Production – Oil and Gas Well Drilling

Mickey Levy, mickey.levy@berenberg-us.com

Mahmoud Abu Ghzalah, mahmoud.abughzalah@berenberg-us.com

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