March 2018 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) rose 0.5% in March (+0.4% expected) after increasing 1.0% in February; the index advanced 4.5% at an annual rate during 1Q. After having climbed 1.5% in February, manufacturing production edged up 0.1% in March (+0.2% expected). Mining output rose 1.0%, mostly as a result of gains in oil and gas extraction and in support activities for mining. The index for utilities jumped 3.0% after being suppressed in February by warmer-than-normal temperatures. At 107.2% of its 2012 average, total industrial production was 4.3% higher in March than it was a year earlier. 

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Industry Groups

Manufacturing output edged up 0.1% in March and increased 3.1% at an annual rate in 1Q. In March, a decline of 0.3% for nondurables (paper products: +0.2%) was outweighed by gains of 0.4% for durables (wood products: 0.0%) and 0.2% for other manufacturing (publishing and logging). Among durables, the index for motor vehicles and parts increased 2.7%; vehicle assemblies moved up to 12.0 million units at an annual rate, their highest level since December 2016.

The index for mining climbed 1.0% in March and was 10.8% higher than its year-earlier level. Mining output has increased for six consecutive quarters, but it is still about 4% below its peak in 2014. 

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Capacity utilization (CU) for the industrial sector moved up 0.3 percentage point in March to 78.0%, a rate that is 1.8 percentage points below its long-run (1972–2017) average.

Manufacturing CU decreased 0.1 percentage point in March to 75.9%, a rate that is 2.4 percentage points below its long-run average. The operating rate for durables, at 75.9%, was 1.0 percentage point below its long-run average, whereas the rates for nondurables and for other manufacturing (publishing and logging), at 77.0% and 61.3%, respectively, were further below their long-run averages of about 80% for each (wood products: -0.3%; paper products: +0.2%).

Utilization for mining rose 0.5 percentage point to 90.1%, which is 3.1 percentage points above its long-run average but 1.5 percentage points below its high in 2014. The capacity utilization rate for utilities jumped 2.2 percentage points to 79.0% but remained below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+1.0 % YoY) to 137.4% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.0% YoY) to 137.4%. Wood products: +0.2% (+1.7% YoY) to 159.6%; paper products: 0.0% (0.0% YoY) to 111.4%.

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.