December 2018 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) increased 0.3% in December (+0.3% expected) after rising 0.4% in November (originally +0.6%). For 4Q as a whole, total IP moved up at an annual rate of 3.8%. In December, manufacturing output increased 1.1%, its largest gain since February 2018. The output of mines rose 1.5%, but the index for utilities fell 6.3%, as warmer-than-usual temperatures lowered the demand for heating. At 109.9% of its 2012 average, total IP was 4.0% higher in December than it was a year earlier. 

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Industry Groups

Manufacturing output advanced 1.1% in December and increased at an annual rate of 2.3% in 4Q; the index rose 2.5% between 4Q2017 and 4Q2018. Within durable manufacturing, motor vehicles and parts posted a gain of 4.7% in December, and nonmetallic mineral products recorded an increase of nearly 3%; the indexes for several other durable goods industries advanced more than 1% (wood products: +1.8%). Among nondurables, the index for petroleum and coal products jumped 3.5%. Most other major categories of nondurables posted gains of less than 1% (paper products: -0.2%). The output of other manufacturing (publishing and logging) increased 0.2%.

Mining output rose 1.5% in December, with gains in oil and gas extraction, coal mining, and support activities for mining (mainly oil and gas well drilling); the index for mining was 13.4% above its level from a year earlier. The output of utilities fell 6.3% in December, with both electric and gas utilities posting sharp declines.

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Capacity utilization (CU) for the industrial sector rose 0.1 percentage point (PP) in December to 78.7%, a rate that is 1.1PP below its long-run (1972–2017) average.

Manufacturing CU jumped 0.7PP in December to 76.5%, about 2PP below its long-run average (NAICS manufacturing: +0.9%, to 77.2%; wood products: +1.5%; paper products: -0.1%). The utilization rate for mining increased to 94.8% and remained well above its long-run average of 87.0%. The operating rate for utilities fell to 75.0%, a rate that is about 10PP below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+2.1 % YoY) to 139.6% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.5% YoY) to 139.0%. Wood products: +0.3% (+3.7% YoY) to 164.3%; paper products: -0.1% (-1.0 % YoY) to 110.3%.

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.