This resistance to declining production occurred despite weak consumer spending in December and high prices for materials and energy. The Federal Reserve Board's latest numbers show a mixed outlook of both strengths and weaknesses.

Monthly and Yearly Changes
Looking at the production figures and comparing January 2008 with December 2007, we see the following:

• Manufacturing production: no change;
• Utilities output: 2.2 percent gain;
• Mining output: decline of 1.8 percent.

However, comparing January 2008 with January 2007, gains are seen clearer:

• Manufacturing production: 2 percent gain;
• Utilities output: 6.2 percent gain; and
• Mining output: 0.9 percent gain.

Other January data on production:

• The output of automotive products fell 1.2 percent;
• Auto and truck assembly declined;
• Chemicals declined;
• Clothing fell;
• Appliances, furniture and carpeting dropped 2.1 percent;
• Food gained slightly;
• Business equipment rose 0.4 percent; and
• Information processing equipment increased 1.6 percent.

Looking at percent of capacity utilization, and comparing January 2008 with December 2007, we see:

• Manufacturing: a decline of 0.1 percent;
• Utilities output: 1.6 percent gain; and
• Mining output: decline of 1.8 percent.

Again, comparing January 2008 with January 2007:

• Manufacturing: 2.1 percent gain;
• Utilities output: 1.3 percent gain; and
• Mining output: 0.3 percent gain.

"Economists had expected utilization to slip to 81.4 percent," from 81.5 percent, noted CNNMoney.com.

In summary, the Institute for Supply Management (ISM) describes economic activity in the manufacturing sector this way: "Production growing; new orders, employment and inventories contracting; and supplier deliveries slowing."

For January, prices rose 8 percent while inventories went from 45.4 in December to 49.1 in January. Also, the backlog of orders only rose from 43 in December to 44 in January.

As recently as December, unfilled orders for manufactured durable goods were up 31 of the last 32 months, increasing 2.5 percent. According to the U.S. Census Bureau, this was also at the highest level since the series was first started on a NAICS basis in 1992 and followed a 1.3 percent November increase.

Materials Concern
A rerun of last year, the rising costs of raw materials and energy are making it difficult for manufacturers to make a profit because customers buy only at the lowest prices.

Prime Advantage, a buying consortium of small and midsized manufacturers, polled its members and recently announced its findings: "More than 46 percent of respondents agreed that raw materials (including stainless steel, nickel, copper and other metals and plastics) were a major concern in 2008."

"The uncertainty around pricing pressures for raw materials continues to be an obstacle to success for many small- and midsized manufacturers," said Louise O'Sullivan, founder and president of Prime Advantage, which has more than 450 members and more than 110 endorsed suppliers.

Energy costs were the second biggest concern with 17.5 percent, the company's survey shows.

Ever Rarer Oil and Natural Gas
Just as the cost of petroleum started receding recently, several events caused them to rise to $100 a barrel. According to CNNMoney.com, the reasons:

• Tetsu Emori, a commodity markets fund manager at ASTMAX Futures Co., told CNN that the Organization of Petroleum Exporting Countries may reduce output next month;
• As a result of conflict, Nigeria, Africa's biggest producer and a major supplier of crude to America, has seen its output fall by about 20 percent, helping send oil prices higher; and
• This week's explosion at a Texas refinery may have boosted prices.

Besides the oil price hike, natural gas futures rose more than 20 cents to $8.862 per 1,000 cubic feet, as notes CNN.

If all this data seems sobering, other figures further support this sentiment. The ISM, in its January 2008 Manufacturing ISM Report on Business, posed to its manufacturing panel the statement, "Indicate how you and your management feel about the next 12 months compared to 2007."

ISM's findings:

• Better: 22.9 percent;
• Same: 37.5 percent; and
• Worse: 39.6 percent.

However, these attitudes reflect no knowledge that an economic stimulus plan would become law. The other question was, "Is the turmoil in the financial markets having any effect on your firm's ability to obtain regular or additional financing?"

Only, 7.4 percent said "yes"; 92.6 percent said "no."

Looking forward, for small and midsize manufacturers, the Prime Advantage Group Outlook Survey identified a positive outlook for revenue expectations and hiring with 59 percent indicating a revenue boost in 2008.

Resources

Industrial Production and Capacity Utilization
The Federal Reserve Board, Feb. 15, 2008

Industrial Production Up Slightly
CNNMoney.com, Feb. 15, 2008

January 2008 Manufacturing ISM Report on Business
Institute for Supply Management, Feb. 1, 2008

Manufacturers' Shipments, Inventories and Orders (M3)
U.S. Census Bureau, Feb. 4, 2008

Raw Materials and Energy Expenses to a List of Economic Concerns in 2008 for Small to Midsize Manufacturers
Prime Advantage, Feb. 15, 2008

Oil Breaks $100, Hits New All-Time High
The Associated Press (via CNNMoney.com), Feb. 19, 2008

Supply Fears Push Oil to Triple Digits
by Clifford Krauss
The New York Times, Feb. 20, 2008