October 2018 Industrial Production, Capacity Utilization and Capacity

Click image for larger version

Total industrial production (IP) edged up 0.1% in October (+0.2% expected), as a gain for manufacturing outweighed decreases elsewhere. As a result of upward revisions primarily in mining, the overall index is now reported to have advanced at an annual rate of 4.7% in 3Q, appreciably above the gain of 3.3% reported initially. Hurricanes lowered the level of IP in both September and October, but their effects appear to be less than 0.1% per month. In October, manufacturing output rose 0.3% for its fifth consecutive monthly increase, while the indexes for mining and for utilities declined 0.3% and 0.5%, respectively. At 109.1% of its 2012 average, total IP was 4.1% higher in October than it was a year earlier. 

Click image for larger version 

Click image for larger version

Industry Groups

Manufacturing output moved up 0.3% in October despite a sizable drop in motor vehicle assemblies; manufacturing production excluding motor vehicles and parts increased 0.5%. The output of durables advanced 0.5%, as the indexes for most of its component industries other than motor vehicles strengthened (wood products: -0.4%). Nondurables posted a gain of 0.2%, with mixed results among its industries (paper products: +0.9%). The output of other manufacturing (publishing and logging) fell 1.5%.

Mining output declined 0.3% in October. After reaching an all-time high in August, primarily as a result of gains in the oil and gas sector, production slipped slightly over the past two months; the index in October was about 24% above its trough in 2016. The index for utilities moved down 0.5% in October, as a decrease for electric utilities was partially offset by a large increase for natural gas utilities. 

Click image for larger version

Capacity utilization (CU) for the industrial sector was 78.4%, a rate that is 1.4 percentage points (PP) below its long-run (1972–2017) average.

Manufacturing CU edged up in October to 76.2% (NAICS basis: +0.2%, to 76.8%) -- with gains for durables and nondurables (wood products: -0.7%; paper products: +1.0%) and a loss for other manufacturing (publishing and logging) -- but it was still 2.1PP below its long-run average. The utilization rate for mining fell to 92.7% but remained well above its long-run average of 87.0%. The operating rate for utilities moved down to 77.3%, a rate that is 8.0PP below its long-run average. 

Click image for larger version

Capacity at the all-industries level nudged up 0.2% (+1.9 % YoY) to 139.1% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.4% YoY) to 138.7%. Wood products: +0.3% (+3.3% YoY) to 163.2%; paper products: -0.1% (-0.8% YoY) to 110.5%.

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.