October 2019 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) fell 0.8 percent (-0.4% expected) in October after declining 0.3 percent in September. Manufacturing production decreased 0.6 percent in October. Much of this decline was due to a drop of 7.1 percent in the output of motor vehicles and parts that resulted from a strike at a major manufacturer of motor vehicles. The decreases for total IP, manufacturing, and motor vehicles and parts were their largest since May 2018, April 2019, and January 2019, respectively.

Excluding motor vehicles and parts, the index for total industrial production moved down 0.5 percent, and the index for manufacturing edged down 0.1 percent. Mining production decreased 0.7 percent, while utilities output fell 2.6 percent.

At 108.7 percent of its 2012 average, total industrial production was 1.1 percent lower in October than it was a year earlier. 

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Industry Groups

Manufacturing output fell 0.6 percent in October to a level 1.5 percent lower than its year-earlier reading (NAICS manufacturing: -0.6% MoM; -1.3% YoY). In October, the strike in the motor vehicle industry contributed to a drop of 1.2 percent for durables. Excluding motor vehicles and parts, the output of durables moved down 0.2 percent. The indexes for electrical equipment, appliances, and components and for miscellaneous manufacturing each moved down more than 1 percent; wood products recorded the largest gain, with an increase of 0.7 percent. The production of nondurables was unchanged, as increases in the indexes for food, beverage, and tobacco products and for printing and support were offset by declines in other indexes (paper products: -0.7%). The output of other manufacturing (publishing and logging) fell 1.0 percent.

Mining output moved down 0.7 percent in October following a similarly sized decline in September, but the index for mining was still 2.7 percent higher than its year-earlier level. The output of utilities fell 2.6 percent in October; a decrease in the output of electricity more than offset an increase in the index for natural gas utilities.

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Capacity utilization (CU) for the industrial sector decreased 0.8 percentage point (PP) in October to 76.7 percent, a rate that is 3.1PP below its long-run (1972–2018) average.

Manufacturing CU decreased 0.5PP in October to 74.7 percent, a rate that is 3.6PP below its long-run average (NAICS manufacturing: -0.7%, to 75.2%). The operating rate for durables dropped 1.0PP, while the rate for nondurables edged down 0.1PP (wood products: +0.4%; paper products: -0.7%). The utilization rate for mining fell to 88.8 percent yet was still 1.7PP higher than its long-run average. The rate for utilities declined 2.1PP and 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 141.6% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.4% YoY) to 139.9%. Wood products: +0.3% (+4.1% YoY) to 168.1%; 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.