Industrial Production and Inflation

Two econ reports to pass along.

The first is that the Fed said that industrial production rose by 0.8% in December. That’s a strong number. It was the best in two years.

Manufacturing output, the biggest component of industrial production, climbed 0.2% in December, led by gains for primary metals and autos.

Factory activity had been stagnant for much of 2016 but appears to have perked up a little in the final month of 2016. Still, a long stretch of lackluster growth left December output only 0.2% ahead of the same month a year ago.

A separate gauge of manufacturing finished 2016 at its highest mark in two years. The Institute for Supply Management earlier this month said its purchasing managers index rose amid stronger household demand for goods and a brighter consumer outlook following November’s presidential election.

This caused some pain for the long-end of the bond market, and I think that’s a good thing. A month ago, the 10-year yield broke above 2.6%. It’s now back around 2.4% but I’d like to see it rise again.

At the shorter end, inflation continues to be quite tame. The government said that the CPI rose by 0.3% last month while the core rate rose by just 0.2%. For the year, the CPI rose by 2.1%. That’s the highest rate since 2011, but that’s because the other years were so low.

With today’s CPI report we have some final numbers for 2016:
S&P 500 +9.54%
S&P 500 Total Return Index +11.96%
CPI +2.07%
Real S&P 500 +7.31%
Real Total Return Index +9.68%

Posted by on January 18th, 2017 at 3:24 pm


The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.