United State Industrial Production Unexpectedly Declined in January, but Manufacturing Production ...

U.S. industrial production (IP) unexpectedly declined 0.1% in January
2011 following the upwardly revised 1.2% gain (which was significantly
higher than the previously reported 0.8%) in December 2010. The fall
in January came as a surprise because market expectations were for a
0.5% gain. The decline in IP sent the capacity utilization rate down
slightly to 76.1% from 76.2% in December (initially reported as
76.0%).

The overall fall in IP in January was largely a reflection of sharp
declines in the utilities and mining sectors. Utilities production
fell 1.6% following the outsized 4.1% increase seen in December
because "temperatures went closer to normal" in January after the
unseasonably cold weather ramped up heating demand in the previous
month. Mining output also unexpectedly declined, by diminishing 0.7%
in January after posting a solid 0.5% gain in December. On a more
positive note, manufacturing production rose for the seventh
consecutive month in January, by climbing 0.3% following the upwardly
revised 0.9% gain seen in the previous month (initially reported as a
0.4% gain). The monthly increase was driven by a sharp 3.2% jump in
the motor vehicle and parts component, and a 1.3% rise in the
machinery production. The gain in manufacturing output was expected
given the strong data out of the sector from the January ISM and
employment reports.

After the manufacturing sector showed considerable strength during
2010, today's report indicates that, although there has been some
moderation in the expansion of the sector in recent months, the
overall positive momentum in manufacturing has carried into 2011. We
expect that manufacturing will continue to grow during this year,
although the pace of growth may well ease from the 5.7% annual gain
posted in 2010. Despite the continued growth in overall industrial
production, we expect that the environment of surplus capacity will
likely persist as utilization rates remain well below pre-depression
levels. Combined with a subdued inflation backdrop and elevated
unemployment, this continues to suggest that the Fed will likely keep
its policy rate in the current highly stimulative 0.00% to 0.25% range
throughout 2011.

Source: ActionForex.Com