April 2017 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) advanced 1.0% in April (+0.4% expected) for its third consecutive monthly increase and its largest gain since February 2014. Manufacturing output rose 1.0% as a result of widespread increases among its major industries. The indexes for mining and utilities posted gains of 1.2% and 0.7%, respectively. At 105.1% of its 2012 average, total industrial production in April was 2.2% above its year-earlier level. 

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Industry Groups

As with the overall index, the increase of 1.0% for manufacturing output in April (+0.3% expected) was its largest since February 2014. The indexes for durables and for nondurables each advanced 1.0%, while the output of other manufacturing (publishing and logging) moved up 0.7%. The increase in durables was spearheaded by a large advance for motor vehicles and parts (wood products: +0.5%), while the improvement for nondurables was led by gains for food, beverage, and tobacco products, for textile and product mills, for printing and support, and for chemicals (paper products: +0.8%).

After falling 0.4% in March, the output of mining rose 1.2% in April, largely because of pickups in coal mining and in drilling and support activities. The mining index in April was 7.3% higher than its year-earlier level but 11.2% below its peak in December 2014. The output of utilities moved up 0.7%, as warmer-than-normal temperatures boosted air-conditioning usage and electric power generation; the increase in electricity generation was offset somewhat by lower output for gas utilities, as demand for heating slackened. 

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Capacity utilization (CU) for the industrial sector increased 0.6 percentage point (+0.9%) in April to 76.7%, a rate that is 3.2 percentage points below its long-run (1972–2016) average.

Manufacturing CU rose 0.7 percentage point (+0.9%) in April to 75.9%, a rate that is 2.5 percentage points below its long-run average. Although durables, nondurables, and other manufacturing (publishing and logging) all recorded substantial increases in utilization (wood products: +0.5%; paper products: +0.9%), their operating rates remained below their respective long-run averages, with the shortfall being the greatest for other manufacturing. Utilization for mining moved up 0.8 percentage point to 83.3% but remained below its long-run average. The operating rate for utilities rose 0.5 percentage point to 76.3%. 

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Capacity at the all-industries level nudged up 0.1% (+0.7% YoY) to 137.0% of 2012 output. Manufacturing (NAICS basis) inched up +0.1% (+0.9% YoY) to 137.0%. Wood products: +0.0% (+0.5% YoY) to 155.8%; paper products: -0.1% (-2.0% 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.