September 2018 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) increased 0.3% in September (+0.3% expected), about the same rate of change as in the previous two months. Output growth in September was held down slightly by Hurricane Florence, with an estimated effect of less than 0.1 percentage point (PP). For the third quarter as a whole, total industrial production advanced at an annual rate of 3.3%. In September, manufacturing output moved up 0.2% for its fourth consecutive monthly increase, while the output of utilities was unchanged. The index for mining increased 0.5% and has moved up in each of the past eight months. At 108.5% of its 2012 average, total industrial production was 5.1% higher in September than it was a year earlier. 

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Industry Groups

Manufacturing output moved up 0.2% in September. Factory output advanced 2.8% at an annual rate in the third quarter, a slightly faster gain than in the second quarter. In September, the indexes for durables and for other manufacturing (publishing and logging) rose, while the index for nondurables edged down. Production rose for most major categories within durable manufacturing. The largest increases were posted by motor vehicles and parts, wood products (+1.7%), and primary metals, while the only sizable decline was recorded by nonmetallic mineral products. Among nondurables, results were mixed, as the indexes for textile and product mills and for apparel and leather fell nearly 2%, but the indexes for printing and support and for petroleum and coal products rose about 1% (paper products: +0.2%).

Mining output increased 0.5% in September. The index has advanced about 24% from its trough in 2016, supported by gains in the oil and gas sector. The index for utilities was unchanged in September, as a decline in electric utilities offset an increase in natural gas utilities. 

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

Manufacturing CU edged up in September to 75.9% but was still 2.4PP below its long-run average. The operating rates for durables and for other manufacturing increased, but the rate for nondurables decreased (wood products: +1.4%; paper products: +0.3%). The utilization rate for mining edged down to 92.1% but remained well above its long-run average. The utilization rate for utilities moved down to 77.7% and remained more than 7PP below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+1.8 % YoY) to 138.9% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.4% YoY) to 138.5%. Wood products: +0.3% (+3.1% YoY) to 162.7%; paper products: -0.1% (-0.7% YoY) to 110.6%.

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.