Wells Fargo: US Industrial Production Not Getting Worse

Though still affected by supply chain bottlenecks and constraints including labour shortages, the US industrial production grew just 0.5% in November, a marked slowdown from the upwardly revised 1.7% pick-up in October, mentioned analysts at Wells Fargo.

Analysts have pointred out that slight improvements in supplier deliveries suggest things are at least not getting worse.

US industrial production increased 0.5% in November, a tenth of a percentage point shy of the consensus expectation; though after accounting for a slight upward revision to October’s increase, the level of industrial output is essentially right in line with expectations.

There was not much in the way of new developments in today’s report; the country’s industrial output is limited by the availability of raw materials and workers. While both will improve over time, any meaningful change is still several months away. The fact that ISM supplier deliveries came down a few points in November suggests it is at least not getting worse.

Overall capacity utilization rose to 76.8% in November, which is the highest reading since November 2019. That said, it might be premature to worry about a meaningful inflation push from tight capacity, at least if history is any guide. At it’s highest point in the prior cycle, capacity utilization topped out at 79.9%, and in the 1990s it rose as high at 85%.