February 2018 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) rose 1.1% in February (+0.3% expected) following a decline of 0.3% in January. Manufacturing production increased 1.2% (+0.4% expected), its largest gain since October. Mining output jumped 4.3%, mostly reflecting strong gains in oil and gas extraction. The index for utilities fell 4.7%, as warmer-than-normal temperatures last month reduced the demand for heating. At 108.2% of its 2012 average, total industrial production in February was 4.4% higher than it was a year earlier. 

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Industry Groups

In February, manufacturing output increased 1.2%. Gains were recorded by every major manufacturing industry except for electrical equipment, appliances, and components and for petroleum and coal products. The production of durables climbed 1.8% (wood products: +2.6%), and the index for nondurables moved up 0.7% (paper products: +0.4%). The output of other manufacturing (publishing and logging) increased 0.4%.

The output of mining jumped 4.3% in February, more than reversing its decline in January. The gain in the index for February reflected strength in the oil and gas sector and in coal mining. The index for oil and gas extraction in February was about 12% higher than its year-earlier level and was at the highest level in the history of the series. 

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Capacity utilization (CU) for the industrial sector climbed 0.7 percentage point in February to 78.1%, its highest reading since January 2015 but still 1.7 percentage points below its long-run (1972–2017) average.

Manufacturing CU rose 0.9 percentage point to 76.9% in February (77.7% expected). The factory operating rate has risen 1.3 percentage points over the past 12 months to reach its highest level since April 2008, but it was still 1.4 percentage points below its long-run average. Utilization for durables increased 1.2 percentage points to 76.8%, a rate that is 0.1 percentage point below its long-run average. The operating rates for both nondurables and other manufacturing rose 0.5 percentage point, to 78.0% and 63.4%, respectively (wood products: +2.5%; paper products: +0.4%). Utilization for mining rose 3.3 percentage points to 87.6%, which is 0.6 percentage point above its long-run average. The capacity utilization rate for utilities fell 3.9 percentage points to 76.9% and remained below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+1.3% YoY) to 138.5% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +0.9% YoY) to 138.2%. Wood products: +0.2% (+0.7% YoY) to 157.1%; paper products: 0.0% (0.0% YoY) to 110.5%.

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.