Implications: Industrial production took a breather in December, though the details of the report were much better than the headline, with the weakness coming from the volatile auto and utilities sectors. The 4.7% decline in auto production in December represents a return to a more normal pace after the 12.8% surge in November, which was the largest monthly gain since 2009, as GM employees returned to work following the conclusion of a strike. Excluding the auto sector, manufacturing rose a healthy 0.6%. Notably, manufacturing has been accelerating lately, up at an annualized pace of 1.9% over the past three months versus a decline of 1.3% over the past year. Turning to utilities, output dropped due to unseasonably warm weather in December which reduced demand for heating following unusually cold weather in November. Finally, mining output rose 1.3% in December, fueled by an increase in oil and gas extraction. Taking 2019 as a whole, industrial production hit a record high, eking out a 0.8% gain over 2018. We expect faster growth in 2020 as we put some of the major headwinds for the factory sector behind us. The GM strike is over, USMCA has been passed, and a Phase One trade deal with China has been signed.
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