September 2017 Industrial Production, Capacity Utilization and Capacity

Click image for larger version

Total industrial production (IP) rose 0.3% in September (+0.1% expected). The rates of change for July and August were notably revised; the current estimate for July, a decrease of 0.1%, was 0.5 percentage point lower than previously reported, while the estimate for August, a decrease of 0.7%, was 0.2 percentage point higher than before. The estimates for manufacturing, mining, and utilities were each revised lower in July. The continued effects of Hurricane Harvey and, to a lesser degree, the effects of Hurricane Irma combined to hold down the growth in total production in September by 1/4 percentage point. The indexes for mining and utilities in September rose 0.4% and 1.5%, respectively. At 104.6% of its 2012 average, total IP in September was 1.6% above its year-earlier level.

For the third quarter as a whole, industrial production fell 1.5% at an annual rate; excluding the effects of the hurricanes, the index would have risen at least 1/2%. Manufacturing output edged up 0.1% in September but fell 2.2% at an annual rate in the third quarter. 

Click image for larger version 

Click image for larger version

Industry Groups

Manufacturing output edged up 0.1% in September. A gain of 1.0% for durables outweighed a decrease of 0.9% for nondurables, and the output of other manufacturing (publishing and logging) was unchanged. Among durables, the largest increases—about 3%—were recorded by nonmetallic mineral products; machinery; and electrical equipment, appliances, and components (wood products: +1.6%). Among nondurables goods industries, declines were widespread, with the largest drop coming in the output of chemicals (paper products: -0.9%). Only the indexes for food, beverage, and tobacco products and for plastics and rubber products advanced.

In September, the rise of 0.4% for mining reflected a gain in oil and gas extraction; all of its other major components recorded losses. Over the past 12 months, mining output has increased 9.8% from its trough in September 2016. 

Click image for larger version

Capacity utilization (CU) for the industrial sector increased 0.2 percentage point (and 0.2%) in September to 76.0%, a rate that is 3.9 percentage points below its long-run (1972–2016) average.

Manufacturing CU was unchanged at 75.1% in September, a rate that is 3.3 percentage points below its long-run average. Utilization for durables increased 0.7 percentage point to 74.9%, while the operating rate for nondurables fell 0.7 percentage point to 76.3% (wood products: +1.6%; paper products: -0.9%). The operating rate for mining edged up 0.1 percentage point to 83.5%, and the rate for utilities rose 1.1 percentage points to 74.8%. 

Click image for larger version

Capacity at the all-industries level nudged up 0.1% (+1.1% YoY) to 137.1% of 2012 output. Manufacturing (NAICS basis) inched up +0.1% (+0.8% YoY) to 137.5%. Wood products: +0.0% (+0.5% YoY) to 156.3%; paper products: 0.0% (-0.7% 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.