April 2013 Industrial Production, Capacity Utilization and Capacity

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Industrial production (IP) decreased 0.5 percent in April after having increased 0.3 percent in March and 0.9 percent in February. At 98.7 percent of its 2007 average, total industrial production was 1.9 percent above its year-earlier level.

Manufacturing output moved down 0.4 percent in April after a decline of 0.3 percent in March. The index for utilities decreased 3.7 percent in April, as heating demand fell back to a more typical seasonal level after having been elevated in March because of unusually cold weather. Wood Products and Paper both retreated, by 0.7 and 0.6 percent, respectively. 

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The rate of capacity utilization for total industry moved up in March to 78.5 percent, a rate 1.2 percentage points above its level of a year earlier but 1.7 percentage points below its long-run (1972-2012) average.

The rate of capacity utilization for total industry decreased 0.5 percentage point to 77.8 percent, a rate 0.1 percentage point above its level of a year earlier but 2.4 percentage points below its long-run (1972--2012) average. Capacity utilization declined for both Wood Products and Paper (-0.7 and -0.5 percent, respectively). 

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

The Fed’s IP report paralleled the Institute for Supply Management’s April PMI, which registered 50.7 percent, a drop of 0.6 percentage point from March's seasonally adjusted reading of 51.3 percent (50 percent is the breakpoint between contraction and expansion). I.e., manufacturing essentially stalled in April from ISM’s perspective.

The New York Fed’s Empire State Manufacturing Survey is another contemporary source that is often useful for comparison (despite the different geographic reach and time frame). The May 2013 survey showed that New York manufacturing contracted. The survey “crushed hopes for an increase from 3.05 to 4.00 in May,” ZeroHedge observed, “instead posting the first contractionary print since January, printing at -1.43. It gets worse when one digs through the data: New Orders dropped from 2.20 to -1.17; Shipments also slid into negative [territory,] from 0.75 to -0.02; Unfilled Orders deteriorated even more from -3.41 to -6.82; Inventories contracted from -4.55 to -7.95; Prices Paid and Received both contracted. But worst of all, the Average Employee Workweek dropped from 5.68 to -1.14, meaning the collapse in the average workweek persists; and even if the BLS reports a positive print for May, the report will once again mask the declining aggregate end demand for labor.”

In short, these reports appear to corroborate the view of slowing growth.

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.