September 2019 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) fell back 0.4% (-0.2% expected) in September after advancing 0.8% in August. For 3Q, IP rose at an annual rate of 1.2% following declines of about 2% in both 1&2Q. Manufacturing production decreased 0.5% in September, with output reduced by a strike at a major manufacturer of motor vehicles. Excluding motor vehicles and parts, the overall index and the manufacturing index each moved down 0.2%. Mining production fell 1.3%, while utilities output rose 1.4%. At 109.5% of its 2012 average, total industrial production was 0.1% lower in September than it was a year earlier. 

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Industry Groups

Manufacturing output fell 0.5% in September but rose at an annual rate of 1.1% in 3Q (NAICS manufacturing: -0.5% MoM; -0.8% YoY). In September, the motor vehicle industry strike contributed to a drop of 0.7% for durables; the index for nondurables declined 0.2%, while the index for other manufacturing (publishing and logging) rose 0.5%. Excluding the decrease of 4.2% for motor vehicles and parts, the output of durables edged down 0.1%, with decreases of nearly 1% or more in primary metals; machinery; and electrical equipment, appliances, and components. Gains of nearly 1% or more were recorded by computer and electronic products, by aerospace and miscellaneous transportation equipment, and by furniture and related products; wood products: +0.5%. Among nondurable goods industries, apparel and leather posted the largest gain (2.3%), while plastics and rubber products posted the largest loss (1.2%); paper products: -0.4%.

Mining output moved down 1.3% in September; reductions in crude oil extraction and well drilling contributed to the decline. The index for mining fell at an annual rate of 4.4% in 3Q, its first quarterly decrease in three years. The output of utilities moved up 1.4% in September, as unseasonably warm weather boosted demand for electricity. 

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Capacity utilization (CU) for the industrial sector decreased 0.4 percentage point (PP) in September to 77.5%, a rate that is 2.3PP below its long-run (1972–2018) average.

Manufacturing CU decreased 0.4PP to 75.3% in September, a rate that is 3.0PP below its long-run average (NAICS manufacturing: -0.6%, to 75.7%). The operating rate for durables dropped 0.7PP, while the rate for nondurables decreased 0.3PP (wood products: +0.1%; paper products: -0.4%). The utilization rate for mining fell to 88.9% yet was still almost 2PP higher than its long-run average. The rate for utilities rose 0.9PP 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 141.4% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.4% YoY) to 139.7%. Wood products: +0.3% (+4.1% YoY) to 167.5%; paper products: 0.0% (-0.4 % YoY) to 109.7%.

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.