Bank of the West Daily Update for February 15, 2018

Industrial Production Slips While Core Producer Price Gains Accelerate
Bank of the West Daily Update
Industrial production unexpectedly dipped -0.1% in January and December’s gain was revised lower to 0.4% from an originally reported 0.9%.  Manufacturing production was unchanged, while utilities production growth slowed from 4.6% in December to 0.6%, and mining production declined 1.0% last month.  There was relative weakness in construction supply (-1.4%), production of materials (-0.3%), defense and space (-0.2%), and business supplies (-0.2%).  Manufacturing employment has picked up with the global economy and the weaker dollar.  Today’s industrial production data suggests manufacturing production may be losing a bit of its Q4 momentum. However, February may be off to a healthy start, the Philadelphia Fed index increased more than expected in February to 25.8 from 22.2 in January.
More evidence of near-term inflation pressures surfaced in this morning’s January producer price report.  Both headline and core producer prices increased 0.4% in January. The headline gain was in-line with analyst expectations, but the core PPI increase jumped a larger than expected 0.4%, following a 0.1% decline the month before. From a year ago, producer price inflation remains relatively tame. Final demand producer price inflation is 2.7% up from 2.6% in December.  Producer price inflation, excluding food and energy, decreased less than expected to 2.2% from 2.3% in December.  Like in the Consumer price index released yesterday, January’s increases in final demand producer prices were mostly due to energy price gains at 3.4%.
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