May 2018 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) edged down 0.1% in May (+0.1% expected) after rising 0.9% in April. Manufacturing production fell 0.7% in May, largely because truck assemblies were disrupted by a major fire at a parts supplier. Excluding motor vehicles and parts, factory output moved down 0.2%. The index for mining rose 1.8%, its fourth consecutive month of growth; the output of utilities moved up 1.1%. At 107.3% of its 2012 average, total IP was 3.5% higher in May than it was a year earlier. 

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Industry Groups

Manufacturing output moved down 0.7% in May but was 1.7% higher than its year-earlier level. The indexes for durables and for other manufacturing industries (publishing and logging) each fell more than 1%, while the production of nondurable manufacturing was little changed. Within durables, the drop of 6.5% for motor vehicles and parts was accompanied by decreases of more than 1% for primary metals and for electrical equipment, appliances, and components (wood products: 0.0%). Within nondurable manufacturing, all industry groups other than chemicals and printing posted declines (paper products: -0.7%).

The output of mining rose in May for the fourth consecutive month and was more than 12% above its year-earlier level. The rise in the mining index in May reflected continued gains in the oil and gas sector. The index for utilities went up about 1%, as a gain for electric utilities outweighed a drop for gas utilities. 

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Capacity utilization (CU) for the industrial sector decreased 0.2 percentage point (PP) in May to 77.9%, a rate that is 1.9PP below its long-run (1972–2017) average.

Capacity utilization for manufacturing fell 0.6PP to 75.3% in May, a rate that is 3.0PP below its long-run average. The operating rate for durables decreased nearly 1PP, and the rate for nondurables edged down (wood products: -0.3%; paper products: -0.7%). The utilization rate for mining jumped to 92.4%, which is about 5.5PP higher than its long-run average. The rate for utilities rose about 0.5PP but was still nearly 6PP below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+1.3 % YoY) to 137.8% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.1% YoY) to 137.8%. Wood products: +0.3% (+2.0% YoY) to 160.5%; paper products: 0.0% (0.0% YoY) to 111.3%.

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.