January 2017 Industrial Production, Capacity Utilization and Capacity

Click image for larger version

Total industrial production (IP) decreased 0.3% in January (+0.0% expected) following a 0.6% increase in December. In January, manufacturing output moved up 0.2% (in line with expectations), and mining output jumped 2.8%. The index for utilities fell 5.7%, largely because unseasonably warm weather reduced the demand for heating. At 104.6% of its 2012 average, total IP in January was at about the same level as it was a year earlier.

Industry Groups

The index for manufacturing output rose 0.2% in January. Although the output of motor vehicles and parts decreased 2.9%, production elsewhere in manufacturing moved up 0.5%. The production of durables edged down (wood products: -0.3%), but most of its components other than motor vehicles and parts recorded gains; machinery manufacturing registered the biggest advance. The index for nondurables rose 0.6%, as increases of 1% or more were posted by textile and product mills, by petroleum and coal products, and by chemicals; paper: +0.5%. The output of other manufacturing (publishing and logging) fell 0.7%.

The output of mining jumped 2.8% in January after declining in December, with most mining industries posting increases. The mining index in January was 0.4% higher than its year-earlier level. 

Click image for larger version 

Click image for larger version 

Click image for larger version

Capacity utilization (CU) for the industrial sector fell 0.3 percentage point in January to 75.3%, a rate that is 4.6 percentage points below its long-run (1972–2016) average.

Manufacturing CU moved up 0.1 percentage point in January to 75.1%, a rate that is 3.3 percentage points below its long-run average. The operating rate for durables, at 76.2%, is 0.7 percentage point below its long-run average (wood products: -0.2%); the rates for nondurables (paper: +0.6%) and for other manufacturing (publishing and logging), at 75.0% and 59.9%, respectively, remain substantially below their long-run averages (about 80% for each). Utilization for mining moved up 2.0 percentage points, to 79.1%, but the rate for utilities fell 4.6 percentage points, to 75.1%. Capacity utilization rates for both mining and utilities are well below their long-run averages. 

Click image for larger version

Capacity at the all-industries level nudged up 0.1% (+0.5% YoY) to 138.8% of 2012 output. Manufacturing (NAICS basis) inched up +0.1% (+0.8% YoY) to 138.3%. Wood products retreated for the first time since November 2013 when decreasing by 0.1% (+4.0% YoY) to 170.4%. Paper edged down 0.1% (-1.2% YoY) to 116.0%.

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.