Last month was a mixed bag of good and bad news for the industrial and manufacturing sector. Based on the positive results from The Conference Board's Leading Economic Index for January, the recession's intensity is anticipated to ease over the next few months, MarketWatch reports.

According to the report, the index of leading economic indicators rose 0.4 percent in January, following a downwardly revised 0.2 percent in December and a 0.7 percent decline in November. The positive contributors to the economic index increase were real money supply, the interest rate spread, index of consumer expectations, manufacturers' new orders for non-defense capital goods and manufacturers' new orders for consumer goods and materials.

In the Federal Reserve's newly released industrial production and capacity utilization report, however, manufacturing experienced a dip in output and capacity in January — despite the increase in orders the Conference Board found.

Manufacturing output in January fell 2.5 percent and was 12.9 percent below last year's level, according to the Federal Reserve. Factory operating rate decreased 1.7 percent to 68 percent, the lowest rate of utilization since the series began in 1948.

The output of motor vehicles and parts also fell at a monthly rate of 23.4 percent in January due to extended plant shutdowns. Motor vehicle assemblies fell about 40 percent to an annual rate of 3.9 million units. This drop in output subtracted more than 1 percentage point from the change in manufacturing production.

Production of consumer goods contracted 1.8 percent last month and consumer durable goods fell 10.5 percent, consumer non-energy non-durable goods declined 0.4 percent and consumer energy products increased 1.2 percent. The Federal Reserve forecasts manufacturing capacity to decline 0.6 percent this year after rising 1.7 percent the previous year.

In terms of materials, production of construction supplies decreased 3.4 percent last month and overall materials output declined 1.7 percent. Production of energy materials remained unchanged, but non-energy materials production moved down 2.8 percent, the Federal Reserve says.

Steel and aluminum, specifically, saw a deceleration of shipments last month, the Metals Service Center Institute notes. U.S. steel shipments fell 42.7 percent year-over-year to 2.6 million tons in January. Shipments of aluminum products totaled 91,000 tons, down 43.4 percent from January 2008.

Despite the lower shipments, however, the steel and aluminum sectors were able to decrease their inventories.

Month-end inventories for steel in January totaled 8.48 million tons, 14.9 percent below last year's total and representing a 3.3-month supply. Aluminum inventories at the end of last month totaled 356,400 tons, 19.8 percent lower than January 2008's totals and, at current shipping rates, equal to a 3.9-month supply, the Metals Service Center Institute adds.

Overall, industrial production fell 1.8 percent in January and was 10 percent below 2008 levels, the Federal Reserve says. Total industrial capacity is projected to slide 0.3 percent in 2009 after expanding 1.7 percent last year.

Resources

The Conference Board Leading Economic Index (LEI) for the U.S. Edges Up
The Conference Board, Feb. 19, 2009.

Industrial Production and Capacity Utilization
Federal Reserve, Feb. 18, 2009

Steel, Aluminum Shipment Decline Accelerates in U.S., Canada
Metals Service Center Institute, Feb. 17, 2009

January Leading Indicators Up; Recession's Intensity to Ease
by Ruth Mantell
MarketWatch, Feb. 19, 2009