September 2016 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) edged up 0.1% in September (+0.2% expected) after falling 0.5% in August. For 3Q as a whole, IP rose at an annual rate of 1.8% -- its first quarterly increase since the 3Q2015. Manufacturing output increased 0.2% (3Q: +0.9% SAAR). The index for utilities declined 1.0% in September; mining posted a gain of 0.4%, which partially reversed its August decline. At 104.2% of its 2012 average, total IP in September was 1.0% lower than its year-earlier level.

Industry Groups

Manufacturing output rose 0.2% in September and was unchanged from its year-earlier level. In September, the production of durables remained unchanged, the production of nondurables increased 0.5%, and the production of other manufacturing (publishing and logging) fell 0.8%. Within durables, declines registered by primary metals, by machinery, and by aerospace and miscellaneous transportation equipment were offset by gains elsewhere (e.g., wood products: +0.8%). All of the major categories within nondurables posted increases; the largest gains, of about 1.5%, were recorded by printing and support and by petroleum and coal products; paper (+0.1%).

The index for mining moved up 0.4% in September. Gains for oil and gas well drilling and servicing, for coal mining, and for nonmetallic mineral mining and quarrying outweighed a drop in crude oil extraction. The output of mining increased at an annual rate of 3.7% in the third quarter following six consecutive quarterly decreases. 

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Capacity utilization (CU) for the industrial sector edged up 0.1 percentage point in September to 75.4%, a rate that is 4.6 percentage points below its long-run (1972–2015) average.

Manufacturing CU increased 0.1 percentage point in September to 74.9%, a rate that is 3.6 percentage points below its long-run average. The operating rate for nondurables advanced 0.3 percentage point to 74.7% (paper: +0.2%), while the rates for durables and other manufacturing (publishing and logging) fell to 75.8% and 62.2%, respectively; (wood products: +0.4%). The operating rate for mining moved up 0.5 percentage point to 75.5%, and the rate for utilities fell 0.9 percentage point to 79.1%. 

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Capacity at the all-industries level was unchanged (+0.4% YoY) at 138.3% of 2012 output. Manufacturing inched up +0.1% (+0.8% YoY) to 137.9%. Wood products extended the upward trend that has been ongoing since November 2013 when increasing by 0.4% (+4.6% YoY) to 168.7%. Paper edged down 0.1% (-1.0% YoY) to 116.4%.

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.