February 2013 Industrial Production, Capacity Utilization and Capacity

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Industrial production increased 0.7 percent in February after having been unchanged in January. Manufacturing output rose 0.8 percent, and the index revised up for the previous two months. In February, the output of utilities advanced 1.6 percent, as temperatures for the month were near their seasonal norms after two months of unseasonably warm weather. At 99.5 percent of its 2007 average, total industrial production in February was 2.5 percent above its level of a year earlier.

Industrial production of Wood Products increased by 1.6 percent while Paper rose by 0.2 percent relative to January. 

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The capacity utilization rate for total industry increased to 79.6 percent, a rate that is 0.6 percentage point below its long-run (1972--2012) average. Capacity utilization jumped by 1.7 percent for Wood Products while Paper nudged higher by a comparatively modest 0.3 percent. 

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

It is always useful to compare one data source with another. A contemporary source (despite the different geographic reach and time frame) can be found in the New York Fed’s Empire State Manufacturing Survey. The March 2013 survey indicated that conditions for New York manufacturers continued to improve modestly. As usual, however, closer inspection below the headline revealed some less-cheerful details. ZeroHedge explains (emphasis in the original):

“Following last month's surprising surge in the Empire Fed from a deep negative number to 10.04, the March print was less exciting, declining modestly to 9.24, on expectations of an unchanged number. The new orders and shipments indexes remained above zero, though both were somewhat lower than last month’s levels, dropping from 13.31 to 8.18 and 13.08 to 7.76, respectively. Price indexes showed that input price increases continued at a steady pace while selling prices were flat. Employment indexes suggested that labor market conditions were sluggish, with little change in employment levels and the length of the average workweek. The Number of Employees index dropped from 8.08 to 3.23, back to September 2012 levels. Naturally, with reality worse than expected, all hopes were put in the future as indexes for the six-month outlook pointed to an increasing level of optimism about future conditions, with the future general business conditions index rising to its highest level in nearly a year. This is only the 4th year in a row in which optimism about the future is orders of magnitude higher than the current reality.”

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.