July 2019 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) declined 0.2% in July (+0.1% expected). Manufacturing output decreased 0.4% last month and has fallen more than 1½% since December 2018. In July, mining output fell 1.8%, as Hurricane Barry caused a sharp but temporary decline in oil extraction in the Gulf of Mexico. The index for utilities rose 3.1%. At 109.2% of its 2012 average, total IP was 0.5% higher in July than it was a year earlier. 

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Industry Groups

Manufacturing output declined 0.4% in July (NAICS manufacturing: -0.4% MoM; -0.5% YoY), with durables, nondurables, and other manufacturing (publishing and logging) all posting decreases. Production fell for most major durable goods categories. The largest declines were recorded by wood products (-1.1%), machinery, and nonmetallic mineral products, while the only sizable gain was registered by aerospace and miscellaneous transportation equipment. Paper products (+1.3%) posted the only increase among nondurables; the indexes for textile and product mills, for printing and support, and for plastics and rubber products each fell 1.0% or more.

The output of utilities rose 3.1% in July after having fallen a similar amount in June. Despite declining 1.8% in July, the index for mining was 5.5% above its year-earlier level. 

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Capacity utilization (CU) for the industrial sector decreased 0.3 percentage point (PP) in July to 77.5%, a rate that is 2.3PP below its long-run (1972–2018) average.

Manufacturing CU declined 0.4PP in July to 75.4%, a rate that is 2.9PP lower than its long-run average (NAICS manufacturing: -0.5%, to 75.9%). The operating rate for durable manufacturing declined 0.3PP, and the rate for nondurable manufacturing decreased 0.5PP (wood products: -1.4%; paper products: +1.3%). The utilization rate for mining fell to 89.2%, which is about 2PP above its long-run average. The rate for utilities increased 2.1PP but remained well below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+2.2 % YoY) to 140.9% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.3% YoY) to 139.4%. Wood products: +0.3% (+4.0% YoY) to 166.4%; 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.