March 2017 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) increased 0.5% in March (+0.2% expected) after moving up 0.1% in February. The increase in March was more than accounted for by a jump of 8.6% in the output of utilities—the largest in the history of the index—as the demand for heating returned to seasonal norms after being suppressed by unusually warm weather in February.

Manufacturing output fell 0.4% (+0.3% expected), led by a large step-down in the production of motor vehicles and parts; factory output aside from motor vehicles and parts moved down 0.2%. The production at mines edged up 0.1%.

For 1Q2017 as a whole, total IP rose at an annual rate of 1.5%. At 104.1% of its 2012 average, total IP in March was 1.5% above its year-earlier level. 

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Industry Groups

Manufacturing output decreased 0.4% in March, and the gains in January and February are now reported to have been smaller than stated earlier. The decline in the manufacturing index in March was its first loss since August 2016; nevertheless, factory output increased at an annual rate of 2.7% in 1Q. The production of durables moved down 0.8% in March. Among its major components, only computer and electronic products registered an increase, about 1%, and motor vehicles and parts recorded the largest decrease, 3.0%; wood products: -0.4%.

The index for nondurables edged up, as gains in petroleum and coal products, in chemicals, and in paper products (+0.2%) offset losses elsewhere. The output of other manufacturing (publishing and logging) fell 0.4%.

Mining output edged up 0.1% in March, with continuing gains in oil and gas extraction and in drilling and support activities slightly outweighing large decreases in coal mining and in nonmetallic mineral mining. After advancing 6.6% at an annual rate in 4Q2016, the index for mining jumped 12.1% in 1Q2017. 

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Capacity utilization (CU) for the industrial sector increased 0.4 percentage point in March to 76.1%, a rate that is 3.8 percentage points below its long-run (1972–2016) average.

Manufacturing CU fell 0.3 percentage point in March to 75.3%, a rate that is 3.1 percentage points below its long-run average. The operating rate for durables declined 0.7 percentage point, to 74.6%, and was 2.3 percentage points below its long-run average (wood products: -0.4%).

The rates for nondurables and for other manufacturing (publishing and logging), little changed in March at 77.0% and 63.6%, respectively, remained substantially below their long-run averages (paper products: +0.3%). Utilization for mining edged down 0.1 percentage point to 81.9%, and the rate for utilities jumped 6.0 percentage points to 75.7%. 

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Capacity at the all-industries level nudged up 0.1% (+0.6% YoY) to 136.9% of 2012 output. Manufacturing (NAICS basis) inched up +0.1% (+0.9% YoY) to 136.9%. Wood products: +0.0% (+0.5% YoY) to 155.8%; paper products: -0.1% (-2.2% YoY) to 110.3%.

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.