Industrial Production Rebounds In February, But…

Industrial production unexpectedly increased last month: output climbed 0.6% in February vs. the previous month, or well above most predictions, including The Capital Spectator’s econometric estimate. The good news may not mean much, however, if we’re headed into an economic war with Russia in the wake of yesterday’s vote in the Crimea to secede from Ukraine—an act that the West warns will lead to imposing sanctions on Russia. But for now, let’s consider the upbeat news in the industrial sector as is, even if it’s destined for a rewrite amid what could become the Cold War Light.

Taken at face value, the data certainly look good, at least compared to the previous update on industrial production. February’s 0.6% advance (the biggest gain since last November) is a strong reversal after January’s 0.2% slide. Meanwhile, the year-over-year pace is holding steady at 2.8%. Although that’s down a bit from late last year, it’s roughly average over the past 12 months of updates.

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The cyclically sensitive manufacturing component—the biggest slice of industrial activity—perked up last month as well, jumping 0.8%. That’s an impressive turnaround from January’s 0.9% slump. But the annual rate of growth for manufacturing is still sluggish, rising 1.5% in February vs. the level from a year ago, or near the slowest rate in recent history.

Overall, today’s February output data for the industrial sector offers some support for thinking that the recent slowdown in economic activity is reviving. The argument that there’s a spring thaw in the works for the macro trend carries a bit weight in light of the latest numbers. But with a new risk factor to consider, it’s unclear how much influence today’s good news carries for the weeks and months ahead. Although a stalemate between the US and Russia threatens far more economic harm for Moscow, there will be repercussions all around.

Exactly what those repercussions will be in economic terms for the US is unclear at this stage. The markets have already discounted the potential for trouble. In fact, US stocks are up at the moment, as of mid-morning on Monday. The wisdom of the crowd suggests that the fallout is likely to be minimal for the American economy. But it’s also clear that there’s a new risk factor for looking ahead. This is an evolving situation, as they say, with a lot of uncertainty hanging over the future. With both sides showing no signs of backing down, we may be in for a long road of higher-than-usual doubts about what’s lurking around the next corner. As such, any good news in the next round of economic reports may offer less than meets the eye due to geopolitical events.

“It’s going be difficult, let’s face it,” says Sen. Jeff Flake (R-Ariz.). “Russia has always had its eye on Crimea, it considers Crimea part of Russia. So, that’s going to be difficult. But all you can do is increase the costs significantly and hope that they don’t move further into Ukraine.”

One Response to Industrial Production Rebounds In February, But…

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