Weak US November industrial production won´t move Fed, analyst says

Industrial output Staetside shrank sharply in November, as factory activity stalled and production in the mining and utilities sectors registered another month of large declines.

Industrial production in the world´s largest economy fell by 0.6% month-on-month in November (consensus: -0.2%) and by 1.2% in comparison with a year ago, according to the latest data from the US Federal Reserve.

Production of consumer goods dropped by 0.5% over the month and that of so-called materials by another 0.8%.

Wednesday´s data came as a timely reminder of the tricky situation facing rate-setters in America, as industrial activity contracted - often a poor omen for the economy - even as the services sector continued to hum along.

By industry groups, manufacturing output was flat over the month, while that of the mining and utilities sectors registered month-on-month falls of 8.2% and 7.6%, respectively.

"Manufacturing is under severe pressure from the strong dollar and the collapse in oil sector capex, but it is a small part of the economy, just 12% of GDP. It is a much bigger story for the stock market, but as long as it does not materially depress the labor market, the Fed will be unmoved by the woes of the industrial sector.

"Note that the continued warm weather in early Dec means the utility component likely won't rebound in the next report, but winter will come eventually, triggering mean-reversion," Ian Sheperdson, chief economist at Pantheon Macroeconomics said in a research report sent to clients.

On a more cautious note, Chris Williamson, chief economist at Markit, had this to say following today´s related manufacturing PMI was released: "Although manufacturing only accounts for around one-tenth of the economy, the Manufacturing PMI exhibits a high correlation of 77% with GDP as industrial activity has an important cyclical impact on other parts of the economy."