October 2015 Industrial Production, Capacity Utilization and Capacity

Click image for larger version

Total industrial production (IP) declined 0.2% in October (+0.1% expected) after decreasing the same amount in September. In October, the index for manufacturing moved up 0.4%, while the index for mining fell 1.5% and the index for utilities dropped 2.5%. For 3Q as a whole, total IP is now estimated to have increased at an annual rate of 2.6% instead of the previously reported +1.8%. At 107.2% of its 2012 average, total IP in October was 0.3% above its year-earlier level. Wood Products output jumped 1.9% (-0.4% YoY) while Paper edged up 0.1% (-0.9% YoY).

Manufacturing output increased 0.4% (+0.3% expected), as the output of durable goods advanced 0.5% and the production of nondurable goods rose 0.3%. Nearly all major categories of durable goods industries moved up, and gains of 1.0% or more were recorded by nonmetallic mineral products; electrical equipment, appliances, and components; and primary metals. Among nondurable goods industries, the index for textile and product mills gained 1.9% and the index for petroleum and coal products rose 1.3%, but the index for apparel and leather fell 2.6%. The output of other manufacturing (publishing and logging) fell 0.6% after having dropped a similar amount in each of the previous two months.

The decline of 1.5% in mining output in October reflected sizable reductions both in the indexes for crude oil extraction and for oil and gas well drilling and servicing. Mining output was 6.9% below its level of a year earlier. The index for utilities dropped 2.5%; a decrease for electric utilities was partly offset by an increase for natural gas utilities. 

Click image for larger version 

Click image for larger version 

Click image for larger version

Capacity utilization (CU) for the industrial sector declined 0.2 percentage point (-0.3%) in October to 77.5%, a rate that is 2.6 percentage points below its long-run (1972–2014) average. Wood Products CU rose 1.7% (-2.8% YoY) to 69.9%; Paper nudged up 0.1% (-0.5% YoY) to 82.6%.

The capacity utilization rate for manufacturing rose 0.2 percentage point to 76.4%, a rate 2.1 percentage points below its long-run average. The capacity utilization rate for durable goods industries, at 76.2%, was 0.7 percentage point below its long-run average; the rate for nondurable goods industries, at 77.9%, was 2.5 percentage points below its long-run average. The operating rate for other manufacturing (publishing and logging) decreased 0.3 percentage point in October, to 60.2%. The utilization rate for mines fell 1.4 percentage points to 80.5%, and the rate for utilities decreased 2.1 percentage points to 77.8%. 

Click image for larger version

Capacity at the all-industries and manufacturing levels moved higher -- All-industries: +0.1% (+1.5% YoY) to 138.3% of 2012 output; Manufacturing: +0.1% (+1.3% YoY) to 138.9%. Wood Products extended the upward trend that has been ongoing since November 2013 when increasing by 0.2% (+2.5% YoY) to 160.1%. Paper was unchanged (-0.4% YoY) at 116.9%.

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.