When we look at the industrial production data that will give an idea about economic trends and GDP growth in the first quarter, we see signs of a sharp recovery from the Omicron wave of economic activity. Total industrial production increased by 1.4% in January. Total industrial production in January was 4.1% above the previous year’s level and 2.1% above the pre-pandemic (February 2020) reading. Capacity utilization for the industrial sector increased by 1 percentage point to 77.6% in January, 1.9 percentage points below the long-term (1972-2021) average.
This is a positive data in terms of showing the periodic increase trend in the industry, compared to the signs that the US economy was affected by the increase in COVID-19 cases due to the Omicron variant in January. US companies are increasing their production capacity. This is still a good sign in the risk of production slowdown due to supply problem, plus the related labor need and demand will increase. It can help create the prevailing conditions for a tight market. Bypassing the effects of the Omicron variant will also limit the risks of outbreak sources. Going forward, delays from Omicron, chip-related problems in auto manufacturing, and supply chain inconvenience are factors at risk of slowdown.
The momentum of economic activity supports the Fed’s tightening policy in any case.
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