The U.S. industrial production report beat estimates
The U.S. industrial production report beat estimates with a 1.1% November surge that more-than reversed a -0.9% (was -0.8%) October drop, as hits from the UAW-GM strike, mild weather, and the California brown-outs and fires were reversed. The strike settlement allowed a 1.1% manufacturing pop, with a 20.0% rebound in the vehicle assembly rate to 11.4 from an upwardly-revised 9.5 (was 9.1) M pace that still marks an 8-year low. Utility output rebounded 2.9%, mining output fell -0.2%, and business equipment output surged 1.7%. Industrial production faces an ongoing lift from a gradual climb in the vehicle assembly rate since the UAW-GM strike. Factories will face a big Q1 hit from the suspension of 737 MAX production at Boeing, before a later bounce when the grounding is lifted. Analysts had assumed tariff front-running in Q4 that would lift global manufacturing, but U.S. trade and inventory data suggest that front running has played itself out. Analysts expect an industrial production contraction rate of -0.5% in Q4 thanks to the auto strike and California fires, and a bigger -1.5% drop in Q1 thanks to the Boeing 737 MAX production halt. If Boeing resumes production later in Q1, analysts should see a Q2 industrial production growth rate in the 5% area that finally allows a new high for industrial production by June that beats the December 2018 peak.