By Sharon Nunn 

WASHINGTON -- Economic data are usually noisy, but this week included an onslaught of negative and often contradictory signals that made even seasoned economists scratch their heads.

A Federal Reserve report on Friday showed U.S. industrial production dropped sharply in January, even though other data have suggested the manufacturing sector remains strong. Then the University of Michigan reported a February rebound in consumer sentiment, a day after the Commerce Department said consumer spending sank during the holiday shopping season.

It is a tricky time to be reading economic data for several reasons. First, the government shutdown led to a delay in some reports. Plenty happened between December and February, including the end of the shutdown and a stock-market rebound. Second, the economy appears to be downshifting to a slower rate of growth, which could lead to choppy reports. Add in unusually cold weather in some parts of the country, and it looks like the mixed signals will take some time to sort out.

"It's noisier than normal," said Michael Gapen, chief U.S. economist for Barclays. Taken together, he said, the latest data flip the recent narrative of solid growth in the U.S.

The Fed's report showed industrial production dropped 0.6% in January, even though analysts were expecting a modest gain. It was largely because of a drop in vehicle production, though output in multiple major categories declined or was flat.

The report seemed to contradict the Institute for Supply Management's manufacturing purchasing managers index -- typically viewed as a good gauge of the manufacturing sector's health -- which rose in January. A Labor Department report this month showed manufacturing payrolls rose 13,000 last month, the 18th straight monthly hiring increase.

Analysts were reluctant to dismiss the Fed's data, given that global manufacturing surveys are also weakening. Still, Ben Herzon, executive director of U.S. economics at forecasting firm Macroeconomic Advisers, points out that the ISM survey and the Fed's production report use different methods to take the factory sector's temperature.

"It's important to keep in mind the ISM is a diffusion index...it just measures the number of businesses increasing or decreasing output," Mr. Herzon said. "It doesn't give you a sense of the intra-firm change in production."

The Commerce Department's Thursday retail-sales report showed consumers pulled back spending in almost every retail area in December. Economists had been expecting a slight uptick based on other data they had seen in recent weeks, including reports from individual retailers.

Goldman Sachs Group Inc. economists noted that the seven S&P 500 retail companies that have already reported fourth-quarter earnings, including Amazon.com Inc., showed an 18% annual growth rate in quarterly sales on average.

Analysts' doubts about weakness in the consumer sector seemed to be confirmed Friday when the University of Michigan reported that sentiment rebounded in early February after a January decline.

"We are a bit suspicious" of Thursday's data showing weak holiday retail sales, said Kathy Bostjancic, head U.S. financial market economist at Oxford Economics. "It seems to be a bit of an outlier, when you juxtapose it against the strong labor market, solid income [growth], and consumer sentiment."

A few economists pointed out that data have often diverged when the economy was making some kind of transition that isn't necessarily a recession, and analysts have long predicted U.S. gross-domestic-product growth would slow this year.

"At any given time when you have a shift in growth rates, you can get some mixed signals," Ms. Bostjancic said. "That's important for people to keep in mind, and not automatically assume 'recession.'"

Write to Sharon Nunn at sharon.nunn@wsj.com

(END) Dow Jones Newswires

February 15, 2019 17:30 ET (22:30 GMT)