October 2012 Industrial Production, Capacity Utilization and Capacity

Click image for larger version

Industrial production declined 0.4 percent in October after having increased 0.2 percent in September. Hurricane Sandy, which held down production in the Northeast region at the end of October, is estimated by the Federal Reserve to have reduced the rate of change in total output by nearly 1 percentage point. The largest estimated storm-related effects included reductions in the output of utilities, of chemicals, of food, of transportation equipment, and of computers and electronic products. In October, the index for manufacturing decreased 0.9 percent; excluding storm-related effects, factory output was roughly unchanged from September. At 96.6 percent of its 2007 average, total industrial production in October was 1.7 percent above its year-earlier level. Industrial production of Wood Products increased by 0.1 percent, but Paper fell by 1.2 percent.
 

Click image for larger version

Because the storm made landfall only on the night of October 29, blaming Hurricane Sandy for most of the downturn in industrial production seems a bit suspect to us. Certainly preparations were being made well in advance of landfall, and those preparations covered a wide geographic area because of uncertainty over the storm’s path. Still, it seems to us that estimates of the storm’s impact on industrial production for October are overdone.
 

Click image for larger version

Click image for larger version

Capacity utilization for total industry decreased 0.4 percentage point to 77.8 percent, a rate 2.5 percentage points below its long-run (1972--2011) average. Capacity utilization rose by 0.3 percent for Wood Products but fell by 1.0 percent for Paper.
 

Click image for larger version

Capacity at the all-industries and manufacturing levels crept higher (0.1 percent). By contrast, Wood Products and Paper both dropped by 0.2 percent.


The foregoing comments represent the general economic views and analysis of Delphi Advisors, and are provided solely for the purpose of information, instruction and discourse. They do not constitute a solicitation or recommendation regarding any investment.