May 2017 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) was unchanged in May (+0.2% expected) following a large increase in April and smaller increases in February and March. Manufacturing output declined 0.4% in May (+0.2% expected); the index is little changed, on net, since February. The indexes for mining and utilities posted gains of 1.6% and 0.4%, respectively, in May. At 105.0% of its 2012 average, total industrial production in May was 2.2% above its year-earlier level. 

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Industry Groups

Manufacturing output decreased 0.4% in May following a strong gain in April. Factory production has increased 1.4% over the past 12 months. The index for durables fell 0.8% in May, while the index for nondurables edged up 0.1%; the output of other manufacturing (publishing and logging) moved up 0.3%. Almost all major industry groups within durables posted declines (e.g., wood products: -1.4%); within nondurables, a large gain in chemicals outweighed declines in most other industries (e.g., paper products: -0.7%).

Mining output rose 1.6% in May. Production has increased about 1.5% per month, on average, so far this year; the index in May was 8.3% higher than its year-earlier level. Even so, output in May was still 10.0% below its peak in December 2014. The index for utilities advanced 0.4%, as higher output for gas utilities more than offset a small decrease for electric utilities. 

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Capacity utilization (CU) for the industrial sector edged down 0.1 percentage point in May to 76.6%, a rate that is 3.3 percentage points below its long-run (1972–2016) average.

Manufacturing CU declined 0.3 percentage point (-0.4%) in May to 75.5%, a rate that is 2.9 percentage points below its long-run average. Durables recorded a decrease in utilization, while nondurables and other manufacturing (publishing and logging) each posted increases (wood products: -1.4%; paper products: -0.6%). The operating rate for each group remained below its respective long-run average; the greatest shortfall was for other manufacturing. Utilization for mining moved up 1.1 percentage points to 84.3% but remained below its long-run average. The operating rate for utilities rose 0.3 percentage point to 76.6%. 

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Capacity at the all-industries level nudged up 0.1% (+0.8% YoY) to 137.1% of 2012 output. Manufacturing (NAICS basis) inched up +0.1% (+0.8% YoY) to 137.1%. Wood products: +0.0% (+0.4% YoY) to 155.7%; paper products: 0.0% (-1.8% YoY) to 110.2%.

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.