June 2019 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) was unchanged in June (+0.1% expected), as increases for both manufacturing and mining offset a decline for utilities. For 2Q as a whole, IP declined at an annual rate of 1.2%, its second consecutive quarterly decrease. At 109.6% of its 2012 average, total industrial production was 1.3% higher in June than it was a year earlier.  

In June, manufacturing output advanced 0.4%. An increase of nearly 3% for motor vehicles and parts contributed significantly to the gain in factory production; excluding motor vehicles and parts, manufacturing output moved up 0.2%. The output of utilities fell 3.6% as milder-than-usual temperatures in June reduced the demand for air conditioning. The index for mining rose 0.2%. 

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Industry Groups

Manufacturing output increased 0.4% in June after moving up 0.2% in May (NAICS manufacturing: +0.4% MoM; +0.5% YoY). Despite the gains in the past two months, factory production declined at an annual rate of 2.2% in 2Q, about the same pace as in 1Q. In June, the indexes for durables and for nondurables advanced 0.4% and 0.5%, respectively. The output for other manufacturing (publishing and logging) declined 0.5%. Among durables, an increase of nearly 3% in the output of motor vehicles and parts was accompanied by gains of around 1% in the indexes for nonmetallic mineral products and for computer and electronic products (wood products: +0.6%). Among nondurables, the index for petroleum and coal products recorded the largest advance (2.5%) and most other categories also posted gains (paper products: +0.4%); the indexes for printing and support activities and for chemicals registered the only declines.

In June, electric utilities and natural gas utilities posted drops of 3.9% and 2.0%, respectively. Mining output rose 0.2%, as a gain in oil and gas extraction was partly offset by declines in coal mining and in support activities for mining. Mining production advanced 8.9% at an annual rate for the second quarter, its 11th consecutive quarterly increase. 

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Capacity utilization (CU) for the industrial sector decreased 0.2 percentage point (PP) in June to 77.9%, a rate that is 1.9PP below its long-run (1972–2018) average.

Manufacturing CU rose 0.3PP in June (NAICS manufacturing: +0.3%, to 76.4%), with increases for both durables and nondurables (wood products: +0.2%; paper products: +0.4%) and a decrease for other manufacturing (publishing and logging). The overall manufacturing (i.e., non-NAICS) operating rate of 75.9% is 2.4PP below its long-run average. The utilization rate for mining moved down to 91.5%, which is still more than 4PP higher than its long-run average. The operating rate for utilities dropped 3.0PP and remained well below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+2.1 % YoY) to 140.6% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.3% YoY) to 139.2%. Wood products: +0.3% (+4.0% YoY) to 165.8%; paper products: 0.0% (-0.6 % YoY) to 109.8%.

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.