July 2018 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) edged up 0.1% in July (+0.3% expected) after rising at an average pace of 0.5% over the previous five months. Manufacturing production increased 0.3%, the output of utilities moved down 0.5%, and, after posting five consecutive months of growth, the index for mining declined 0.3%. At 108.0% of its 2012 average, total industrial production was 4.2% higher in July than it was a year earlier. 

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Industry Groups

Manufacturing output increased 0.3% in July and was 2.8% higher than its year-earlier level. The index for durables rose 0.4%, the index for nondurables moved up 0.2%, and the index for other manufacturing (publishing and logging) fell 0.5%. Within durables, most major industry groups posted increases; the largest gains, of around 1% each, were for motor vehicles and parts and for computer and electronic products (wood products: +0.1%). Within nondurables, increases in the indexes for apparel and leather, for petroleum and coal products, for chemicals, and for plastics and rubber products were partly offset by decreases elsewhere (paper products: -0.8%).

Mining output declined in July, as a further increase in oil and gas extraction was slightly outweighed by decreases in the indexes for other mining and for mining support activities. Despite the pullback in July, mining output was nearly 13% above its year-earlier level. The index for utilities fell 0.5% in July for its third consecutive monthly decrease. 

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Capacity utilization (CU) for the industrial sector was unchanged in July at 78.1%, a rate that is 1.7 percentage points (PP) below its long-run (1972–2017) average.

Manufacturing CU increased 0.2PP in July to 75.9%, a rate that is 2.4PP below its long-run average. The operating rates for durables and nondurables moved up 0.2PP and 0.1PP, respectively (wood products: -0.2%; paper products: -0.7%). The utilization rate for mining fell to 92.0%, which is 5.0PP higher than its long-run average. The rate for utilities fell 0.5PP to 77.5%, nearly 8PP below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+1.6 % YoY) to 138.4% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.3% YoY) to 138.1%. Wood products: +0.3% (+2.6% YoY) to 161.6%; paper products: -0.1% (-0.5% YoY) to 110.8%.

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.