July 2017 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) rose 0.2% in July (+0.3% expected) following an increase of 0.4% in June. In July, manufacturing output edged down 0.1%; the production of motor vehicles and parts fell substantially, but that decrease was mostly offset by a net gain of 0.2% for other manufacturing industries. Following a six-month string of increases beginning in September 2016, factory output was little changed, on net, between February and July. The indexes for mining and utilities in July rose 0.5% and 1.6%, respectively. At 105.5% of its 2012 average, total industrial production was 2.2% above its year-earlier level. 

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Industry Groups

Manufacturing output edged down 0.1% in July. The index for durables decreased 0.5%, but the index for nondurables increased 0.4%. Among durable manufacturing industries, the largest decrease, about 3 1/2%, was recorded by motor vehicles and parts; in addition, the indexes for primary metals and for furniture and related products each dropped more than 1% (but wood products: +0.6%). Among nondurable manufacturing industries, increases of 1% or more were posted by chemicals and by apparel and leather (paper products: +0.1%). The index for other manufacturing (publishing and logging) moved down 0.4%.

The index for mining rose 0.5% in July for its fourth consecutive monthly increase. Within mining, gains in oil and gas extraction and in metal ore mining were partially offset by declines in nonmetallic mineral mining and in drilling and support activities. The decrease of 0.5% in drilling and support services followed 10 consecutive months of increases for that index. 

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Capacity utilization (CU) for the industrial sector was unchanged in July at 76.7%, a rate that is 3.2 percentage points below its long-run (1972–2016) average.

Manufacturing CU edged down 0.1 percentage point in July to 75.4%, a rate that is 3.0 percentage points below its long-run average. The operating rate for durables declined 0.4 percentage point to 74.2%, the rate for nondurables increased 0.3 percentage point to 77.7% (wood products: +0.6%; paper products: +0.1%), and the rate for other manufacturing (publishing and logging) was unchanged. Utilization for mining moved up 0.2 percentage point to 84.6%, and the rate for utilities increased 1.2 percentage points to 78.1%. Capacity utilization rates for both mining and utilities remained well below their long-run averages. 

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Capacity at the all-industries level nudged up 0.1% (+1.1% YoY) to 137.5% of 2012 output. Manufacturing (NAICS basis) inched up +0.1% (+0.9% YoY) to 137.3%. Wood products: +0.0% (+0.6% YoY) to 156.2%; paper products: 0.0% (-1.1% YoY) to 110.4%.

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.