Industries

Helping clients meet their business challenges begins with an in-depth understanding of the industries in which they work. That’s why KPMG LLP established its industry-driven structure. In fact, KPMG LLP was the first of the Big Four firms to organize itself along the same industry lines as clients.

How We Work

We bring together passionate problem-solvers, innovative technologies, and full-service capabilities to create opportunity with every insight.

Learn more

Careers & Culture

What is culture? Culture is how we do things around here. It is the combination of a predominant mindset, actions (both big and small) that we all commit to every day, and the underlying processes, programs and systems supporting how work gets done.

Learn more

Industrial production stalled in January

Manufacturing formed an outlier to other sectors.

 

Industrial production flatlined in early January, much less than the expected growth rate of 0.5%. The headline number was pulled down by an historic 9.9% fall in utilities production, which was driven by the change from a cold December to a warm January. The drop masked some strength in the manufacturing sector, where gains were broad-based, as several sectors posted monthly increases of over 1%. The underlying strength in the January report suggests that conditions in the sector may not be as weak as suggested at year-end, complicating the Federal Reserve’s path to slow the pace of inflation.

Production of energy goods was the other notable decline in January. The 2.5% contraction was led by a 9.4% decline in the production of consumer energy goods. Some of the decline is likely attributable to widespread flooding and weather disruptions in California. Conditions in this sector are likely to remain volatile in 2023 as geopolitical developments and volatile gas prices threaten consumer demand.

The strength in the manufacturing sector was pronounced at the start of the year. After declining in the previous two months, the sector grew by 1.0% in January, above the expected rise of 0.8%. Production of manufactured consumer goods declined by 0.7% from December to January, but the drop was driven almost exclusively by plummeting production in energy goods. Nearly every other market group posted a gain.

Motor vehicle production rebounded after two months of steep declines, driven in part by strong sales to businesses restocking their fleets. Capacity utilization in the industry has slipped lately and remains 4.3 percentage points below its 2017-2019 average. Automobile demand has historically been sensitive to interest rates. The rebound could be temporary and would be negatively impacted should the Federal Reserve need to move more aggressively to fight persistent inflationary pressures.

Strength was welcome news in a sector that contracted over the second half of last year.

Business equipment rose by 1.2% in the month. Production of transit equipment was the only decline, with every other major sector posting a monthly growth rate of over 1.5%. Recent shipping data point to a contraction in demand for transport services, which suggests further weakness in the production of transportation equipment and goods in the first quarter.

Bottom Line:

The lack of growth in the headline industrial production index obscured a sharp increase in the manufacturing sector in January. The broad strength was welcome news in a sector that contracted over the second half of last year, but caution should be exercised. Recent data point to even more persistent inflationary pressures, which could force the Fed to raise rates more than market participants expect. That would lift borrowing costs for consumers and businesses and could produce a headwind for manufacturers.

Explore more

Meet our team

Image of Kenneth Kim
Kenneth Kim
Senior Economist, KPMG Economics, KPMG US

Subscribe to insights from KPMG Economics

KPMG Economics distributes a wide selection of insight and analysis to help businesses make informed decisions.

Thank you

Thank you for subscribing. You should receive a confirmation e-mail soon.

Subscribe to insights from KPMG Economics

Now more than ever, companies are using data to make informed decisions about the future of their business. KPMG Economics is continuously monitoring and analyzing economic and geopolitical data so we can provide business leaders with reliable and timely insight and analysis.

To receive our Economic Updates and other relevant content published by the KPMG Economics as soon as it is released, please provide the following details:

By submitting, you agree that KPMG LLP may process any personal information you provide pursuant to KPMG LLP's Privacy Statement.

An error occurred. Please contact customer support.

Thank you!

Thank you for contacting KPMG. We will respond to you as soon as possible.

Contact KPMG

Use this form to submit general inquiries to KPMG. We will respond to you as soon as possible.

By submitting, you agree that KPMG LLP may process any personal information you provide pursuant to KPMG LLP's Privacy Statement.

An error occurred. Please contact customer support.

Job seekers

Visit our careers section or search our jobs database.

Submit RFP

Use the RFP submission form to detail the services KPMG can help assist you with.

Office locations

International hotline

You can confidentially report concerns to the KPMG International hotline

Press contacts

Do you need to speak with our Press Office? Here's how to get in touch.

Headline