“The Federal Reserve Board reported that industrial production was flat in January 2012. Surprisingly, the report is good news for the economy and the manufacturing sector,” Meckstroth said. “Manufacturing production increased a strong 0.7 percent in January and the growth rate for December was substantially revised up to a very strong 1.5 percent gain. The flat overall performance in January was due to exceptionally warm weather, which led to a 2.5 percent decline in utility production (mining activity also fell).

“The strong manufacturing production performance in January was led by the motor vehicle industry; motor vehicle and parts production increased an exceptionally large 6.8 percent,” he added. “However, even excluding motor vehicles, manufacturing production increased 0.3 percent last month, and 14 of the 20 major manufacturing industries posted growth.  Growing industries were primarily in consumer durables and business equipment.

“An important growth driver is pent-up demand,” Meckstroth noted. “After years of postponing big ticket purchases, consumers have to replace motor vehicles.  Businesses also have pent-up need for business equipment.  So much capacity was eliminated during the 2008-2009 recession that even the moderate manufacturing recovery so far has rapidly pushed up the capacity utilization rate from 65 percent at the depths of the recession to 77 percent in January 2012, only a couple of percentage points from the pre-recession factory usage rate.  MAPI continues to forecast faster growth in manufacturing production than in the economy as a whole this year and next.”