Industry Crib Sheet: Industrial Production Has Best Quarter in 3 Years
January 20, 2014
U.S. industrial production in December rose by 0.3 percent, closing out 2013 with five straight months of growth. Output from September to the end of the year was an annualized 6.8 percent, the biggest quarterly increase since the second quarter of 2010, which reinforces the sentiment that economic momentum is gaining.
Manufacturing, by far the largest component of industrial production, grew by 0.4 percent last month, a slight retreat from the 0.6 percent pace in both October and November. But the sector's output was 2.6 percent higher than December 2012.
Total industrial production -- from manufacturing, mining, and utilities -- was 3.7 percent more than its year-earlier level. December production was in line with economists' forecasts. The strong September-through-December performance gives strength to predictions of 3 to 4 percent GDP expansion for the fourth quarter.
Factory output of consumer goods last month expanded by 0.5 percent and was 3.6 percent higher year-over-year, led by automotive products at 1.8 percent growth. Consumer durables grew at an annual rate of 14.7 percent from September through December. Healthier consumer confidence (indicated by a 0.2 percent improvement in December retail sales) and pent-up demand for vehicles are reasons economists point to greater consumer durable production.
“Pretty clearly there’s been a pickup in manufacturing in the last couple months,” Jim O’Sullivan, chief U.S. economist at High Frequency Economy, told Bloomberg. “Certainly you have to start with the consumer in the last couple of months, and there’s been a pretty strong pace in goods consumption.”
Business equipment, meanwhile, continued to drop after November, falling 0.5 percent, but for the fourth quarter grew at an annualized 3.7 percent. The index for defense and space equipment was unchanged in December, but was 2.2 percent higher versus 2012 and expanded at an annual rate of 7.5 percent in the fourth quarter.MORE FROM THOMASNET NEWS: Paper Price Forecast for 2014
The production of all durable goods edged up 0.1 percent in December. The largest gains — about 1.5 percent — were posted by primary metals; electrical equipment, appliances, and components; and motor vehicles and parts. The largest declines — around 2 percent — were recorded by wood products and machinery. For the fourth quarter, durable manufacturing jumped at an annual rate of 8.8 percent.
Nondurable goods increased 0.9 percent in December. All major categories except textile and product mills posted gains, with a notable expansion in consumer nondurables. Output of petroleum and coal products, chemicals, and plastics and rubber products grew a median 0.8 percent. For the fourth quarter, nondurable manufacturing rose at an annual rate of 4.1 percent.
Manufacturing capacity utilization in December was 77.2 percent, an increase of 0.3 percent over November, and 1.6 percent higher than the same time in 2012. Factory operating rates for durable manufacturing was 77.4 percent and 0.4 percent higher than its long-run average.
Mining in December grew by 0.8 percent, but output from utilities contracted significantly from 3 percent in November to -1.4 percent. With high capacity utilization rates in mining and utilities, total industrial capacity utilization in the U.S. grew by 0.1 percent to 79.2.
November's big industrial activity gain was revised down slightly from 1.1 to 1 percent.
President Barack Obama last Wednesday unveiled a North Carolina-headquartered consortium of businesses and universities as one of three new manufacturing innovation institutes in his National Network for Manufacturing Innovation (NNMI). He announced that the other two institutes will be selected and named in the coming weeks, ending speculation on the NNMI's progress as IMT reported last week.
The new group, the Next Generation Power Electronics Institute, is led by and based at North Carolina State University, and focused on speeding development and commercialization of wide-bandgap semiconductor devices and manufacturing processes. The school will host shared R&D and test facilities as well as workforce development and education programs.
Supported by the Department of Energy, the institute initially counts seven universities and labs and 18 companies as members, including ABB, Delphi, Toshiba, and John Deere. The DOE will fund the institute with $70 million over five years, which will be matched by members of the consortium. The institute, like all future ones, is intended to align the technology development efforts of federal agencies, academic and training institutions, and the private sector. Major corporations will be connected with innovative smaller firms, which will give the latter better access to infrastructure and resources.
Wide-bandgap semiconductors are seen as a next-generation technology that takes over where silicon semiconductors leave off, delivering power electronic devices that are smaller, faster, more efficient, and less expensive. The technology will benefit consumer electronics, telecom equipment, electric vehicles, industrial motors, and the smart grid. At the same time, the Obama administration intends the institute to be a teaching factory that will create education, training, and internship programs and cultivate high-tech jobs in a growing field.MORE FROM THOMASNET NEWS: Dealing with the Modern, Complex Supply Chain
Obama envisions a national network of 45 manufacturing innovation institutes, based off the success of a pilot institute in Youngstown, Ohio, focused on accelerating additive manufacturing into mass production. However, the $1 billion plan needs approval by Congress. Thus far, the president has used his executive authority to bypass Congress in starting the pilot institute and committing $200 million in existing funds to launch the three institutes. Lawmakers who support the NNMI introduced bipartisan legislation for it last year.
The two other institutes are being handled by the Department of Defense. One concentrates on digital and virtual design and manufacturing tools that will speed concept-to-market in a broad spectrum of industries. The other looks to scale up applied research into advanced lightweight metals to commercialize their use in military vehicles, wind turbines, and medical devices.
Click here to view Obama's remarks on the NNMI at North Carolina State University.
U.S. energy-related carbon dioxide emissions in 2013 are forecast to be 2 percent higher than 2012, says the U.S. Energy Information Administration. The agency is attributing the rise to an increase in coal consumption in the electric power sector. Still, the EIA notes that the impact on long-term emission reduction is "fairly small."
CO2 emissions from the energy sector in 2013 are slightly more than 10 percent below 2005 levels. Since a peak in 2007, emissions declined in four of the following five years and hit an all-time low in 2012.
But for 2013, emissions from every major component of the energy sector -- coal, fossil fuels, natural gas, and petroleum -- will increase. Emissions from fossil fuels are predicted to increase 2.1 percent. Emissions from coal will grow by 4 percent in 2013 after contracting by 12 percent in 2012, but compared to the 2005 level, CO2 produced by coal will be more than 20 percent lower. The EIA predicts that emissions will grow again this year by 0.7 percent.
From 2005 to 2012, continuously improving energy efficiency by the nation -- including in buildings and transportation -- and the economic recession had suppressing effects on energy demand growth and thus CO2 emissions. In the last few years, the boom in natural gas and high prices for other fuel sources in electric power generation helped lower demand for those sources.
While electricity production from coal is predicted to be largely flat to 2040 and overtaken by natural gas by 2035, coal power is experiencing a short rebound because of "higher natural gas prices relative to coal," according to the EIA. After this year, coal CO2 emissions are projected to decline by 2.5 percent in 2015 due to coal-fired power plants being taken offline.
CO2 emissions from natural gas will continue to expand long term, but those levels will be more than offset by declines in the other three fuels. The Obama administration has set a national goal of 20 percent lower energy-related emissions by 2020.MORE FROM THOMASNET NEWS: Can "Ultrasupercritical" Technology Save Coal Power?"
The National Institute for Metalworking Skills reports that it credentialed nearly 14,000 individuals with its industry certifications in 2013, which is an all-time high and represents a nearly 60 percent jump from 2012.
NIMS is a standards and workforce certification body established in 1995 by trade groups in the metal fabrication and machining industries. Since then, it has set nationally recognized skills standards and accredited training and education programs in both public and private sectors. It is one of many organizations looking to close the manufacturing and technology skills gap in the nation.
The record number of credentials issued last year shows that "manufacturing employers are increasingly in need of skilled talent, and individuals are seeking to validate their skills and differentiate themselves," said Jim Wall, NIMS's executive director. More than 6,000 metalworking companies and trade associations have invested in NIMS standards and credentials.
The 52 total NIMS certifications range from entry to master levels in machining, metalforming, stamping, diemaking, and sub-disciplines, as well as in machine building, maintenance, and repair. Individuals must pass knowledge exams and hands-on performance tests on machinery to get credentialed. There are NIMS-accredited programs in use at community and technical colleges, private businesses, and labor unions around the country.USTechVets.org looks to match up vets with employers. The new online site, chartered by several technology industry trade groups and the Consumer Electronics Association, was announced at the recent CES 2014 in Las Vegas and aims to be a two-pronged solution to the skills gap and veteran unemployment. Monster is also a partner in the enterprise and powers the site, www.ustechvets.org.
"Through the combined power of the organizations involved in this initiative, we hope to accelerate veterans' transition to civilian life by providing access to thousands of employment opportunities in the technology sector and the tools and resources they need," said Bobbie Kilberg, CEO of the Northern Virginia Technology Council, a charter member.
Among the features of the new portal is the Military Skills Translator, which turns the experience a veteran inputs "into civilian speak" that he or she can use to build a resume. Employers are being encouraged to post jobs on the site and will have access to 800,000 veteran resumes. It is estimated that more than 1 million servicemen and servicewomen will be returning from active duty over the next three years.Photo credit: supakitmod at FreeDigitalPhotos.net