August 2018 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) rose 0.4% in August (+0.4% expected) for its third consecutive monthly increase. Manufacturing output moved up 0.2% on the strength of a 4.0% rise for motor vehicles and parts; motor vehicle assemblies jumped to an annual rate of 11.5 million units, the strongest reading since April. Excluding the gain in motor vehicles and parts, factory output was unchanged. The output of utilities advanced 1.2%, and mining production increased 0.7%; the index for mining last decreased in January. At 108.2% of its 2012 average, total industrial production was 4.9% higher in August than it was a year earlier. 

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Industry Groups

Manufacturing output increased 0.2% in August and was 3.1% higher than its year-earlier level. The index for durables rose 1.0%, while the indexes for nondurables and for other manufacturing (publishing and logging) declined 0.5% and 0.9%, respectively. Within durables, the largest increases were recorded by motor vehicles and parts, primary metals, and machinery, while the only sizable decrease was registered by furniture and related products (wood products: -0.1%). By contrast, within nondurables, only textile and product mills posted a gain (paper products: -1.1%).

Mining output rose 0.7% in August; it has advanced more than 14% in the past 12 months, supported by substantial increases in the oil and gas sector. The index for utilities moved up 1.2% in August, as a rebound for electric utilities outweighed a small decline for gas utilities. 

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Capacity utilization (CU) for the industrial sector moved up 0.2% in August to 78.1%, a rate that is 1.7 percentage points (PP) below its long-run (1972–2017) average.

Manufacturing CU edged up in August to 75.8%, 2 1/2PP below its long-run average (NAICS manufacturing: +0.1% MoM). The operating rate for durables increased, but the rates for nondurables and for other manufacturing both decreased (wood products: -0.4%; paper products: -1.0%). The utilization rate for mining rose to 92.0% and remained well above its long-run average. The rate for utilities went up to 78.0% but was more than 7PP below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+1.7 % YoY) to 138.6% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.3% YoY) to 138.3%. Wood products: +0.3% (+2.8% YoY) to 162.1%; paper products: -0.1% (-0.6% YoY) to 110.7%.

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.