USD: Industry sends mixed signals

Finally, we have had a couple of February regional manufacturing indices – from the New York and Philadelphia Fed regions. Both bounced back after recent weakness, but the implication nationally is probably minimal. This is a volatile series and had painted a much bleaker picture than the national ISM index reported in January – it rose to a 15M high. But that decent outcome hasn’t been reflected in today’s January industrial production report. The manufacturing sector certainly started the year on a weak footing with output falling 0.5% MoM versus expectations of a flat outcome – we had seen a bit of downside risk here due to falling hours worked. Mining output fell 2.3% MoM, but utilities output jumped 6% so in aggregate industrial production fell 0.1% MoM. This was weaker than the 0.2% consensus forecast while December's output was revised down a tenth of a percentage point to flat output. Weak consumer and industrial activity isn't great news, but somewhat counter-intuitively the strength seen in November and December will still help deliver a decent quarter-on-quarter annualised GDP growth of around 2% in our view.