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U.S. Industrial Production in November 2017 and Gold

Commodities / Gold and Silver 2017 Dec 20, 2017 - 03:00 PM GMT

By: Arkadiusz_Sieron

Commodities

Industrial production in the U.S. increased 0.2 percent in November. What does it mean for the gold market?

The U.S. industrial production rose 0.2 percent last month, but it was flat if we exclude oil and gas extraction. It was slightly below expectations, but it was the third monthly increase in a row. Importantly, expenditures on business equipment climbed 5.2 percent over the last twelve months. Moreover, the capacity utilization for the industrial sector increased from 77.0 to 77.1 percent in November, the highest level since early 2015. Another positive in the report was an upward revision to October’s industrial production from 0.9 percent to 1.2 percent.


On an annual basis, industrial output accelerated to 3.4 percent growth, the biggest increase since the end of 2014. It means that the recovery in the American manufacturing continues, as one can see in the chart below.

Chart 1: U.S. industrial production over the last five years (as % y-o-y).


In December, we should see further improvement in the manufacturing sector. The Empire State Manufacturing Index dropped slightly from 19.6 in November to 18 this month. It was the second decline in a row, but it still signals improving conditions (as any readings above zero indicate better conditions).

Last but not least, the flash U.S. manufacturing PMI rose from 53.9 in November to 55 in December, a 11-month high. Although the flash U.S. services activity index fell from 54.5 to 52.4 in the same time, it remained above the threshold level of 50.

The bottom line is that the U.S. industry has recently rebounded. The manufacturing sector has been rising this year, which is a good sign for the U.S. economy. The recession is less likely with thriving industry. It is bad news for the gold market – the yellow metal shines mostly during recessions or period of sluggish growth. Looking at the manufacturing activity we are far from such conditions. However, the U.S. industry rebounded partially thanks to a weak U.S. dollar – which is something positive for gold. Hence, the impact of flourishing manufacturing on the gold market is far from being simple. Stay tuned!

Thank you.

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Arkadiusz Sieron
Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

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