August 2019 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) rose 0.6% in August (+0.1% expected) after declining 0.1% in July. Manufacturing production increased 0.5%, more than reversing its decrease in July. Factory output has increased 0.2% per month over the past four months after having decreased 0.5% per month during the first four months of the year. In August, the indexes for utilities and mining moved up 0.6% and 1.4%, respectively. At 109.9% of its 2012 average, total IP was 0.4% higher in August than it was a year earlier. 

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Industry Groups

Manufacturing output rose 0.5% in August (NAICS manufacturing: +0.5% MoM; -0.4% YoY), as the indexes for durables and for nondurables increased while the index for other manufacturing (publishing and logging) edged down. Production rose for most major categories within durable manufacturing. The largest gains were recorded by machinery, primary metals, and nonmetallic mineral products (wood products: +0.7%); the only sizable decline was recorded by motor vehicles and parts. The gain of 0.5% for nondurables reflected strength in plastics and rubber products and in chemicals; the other major nondurable goods industries registered either declines or very small increases (Paper products: -0.7%).

Mining output increased 1.4% in August after having fallen a similar amount in July; output in July had been suppressed by a cutback in oil extraction in the Gulf of Mexico due to Hurricane Barry. The output of utilities increased 0.6%, with gains in both electric and natural gas utilities. 

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Capacity utilization (CU) for the industrial sector increased 0.4 percentage point (PP) in August to 77.9%, a rate that is 1.9PP below its long-run (1972–2018) average.

Manufacturing CU increased 0.3PP to 75.7% in August, a rate that is 2.6PP below its long-run average (NAICS manufacturing: +0.4%, to 76.2%). The operating rates for both durable and nondurable manufacturing increased 0.3PP (wood products: +0.4%; paper products: -0.7%). The utilization rate for mining moved up to 90.5%, a bit lower than its average in the three months before Hurricane Barry but 3.4PP higher than its long-run average. The rate for utilities increased 0.3PP 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 141.1% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.4% YoY) to 139.5%. Wood products: +0.3% (+4.1% YoY) to 167.0%; paper products: 0.0% (-0.5 % 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.