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Monday, January 18, 2016

December 2015 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) declined 0.4% in December (-0.2% expected), primarily as a result of cutbacks in utilities and mining. Also, the decrease for total IP in November was larger than previously reported (-0.9% instead of the original -0.6%), but upward revisions to earlier months left the level of the index in November only slightly below its initial estimate. For 4Q as a whole, IP fell at an annual rate of 3.4%. At 106.0% of its 2012 average, total IP in December was 1.8% below its year-earlier level.  
Industry Groups
Manufacturing output slipped 0.1% in December, but increased at an annual rate of 0.5% in 4Q. Factory output in December was 0.8% above its year-earlier level. The output of durable goods moved up slightly in December. Among the categories of durables, the indexes for motor vehicles and parts and for primary metals each dropped more than 1.5%, while the indexes for electrical equipment, appliances, and components and for computer and electronic products each increased more than 1.5%. Wood Products output rose by 0.7%.
The output of nondurables declined 0.2%, led by a drop of 1.2% for petroleum and coal products and by a reduction of 0.8% for paper. These declines were partially offset by increases for plastics and rubber products and for textile and product mills. The output of other manufacturing industries (publishing and logging) fell 0.5%. The index for mining declined 0.8% because of a large drop in coal mining, while the index for utilities decreased 2.0% thanks to continued warmer-than-usual temperatures that reduced demand for heating; both major categories recorded drops of more than 15% at an annual rate in 4Q. 
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Capacity utilization (CU) for the industrial sector decreased 0.4 percentage point (-0.5%) in December to 76.5% (76.9% expected), a rate that is 3.6 percentage points below its long-run (1972–2014) average.
Manufacturing CU was little changed in December at 76.0%, a rate 2.5 percentage points below its long-run average. The operating rate for durable goods industries held steady at 75.8%, roughly 1 percentage point below its long-run average; Wood Products CU was at 71.8% (+0.5%). 
At 77.6%, the operating rate for nondurable goods industries was 2.8 percentage points below its long-run average; Paper CU was at 81.2% (-0.8%). Utilization for other manufacturing industries (publishing and logging) was down 0.3 percentage point to 60.0%. The utilization rate for mining fell 0.8 percentage point to 78.4%, and the rate for utilities dropped 1.6 percentage points to 73.2%, the lowest rate in the history of the series, which began in 1972. 
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Capacity at the all-industries and manufacturing levels moved higher -- All-industries: +0.1% (+1.5% YoY) to 138.6% of 2012 output; Manufacturing: +0.1% (+1.4% YoY) to 139.3%. Wood Products extended the upward trend that has been ongoing since November 2013 when increasing by 0.2% (+2.5% YoY) to 160.7%. Paper was unchanged (-0.2% YoY) at 116.8%.
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.

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