December 2019 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) declined 0.3% in December (-0.3% expected), as a decrease of 5.6% for utilities outweighed increases of 0.2% for manufacturing and 1.3% for mining. The drop for utilities resulted from a large decrease in demand for heating, as unseasonably warm weather in December followed unseasonably cold weather in November. For 4Q as a whole, total IP moved down at an annual rate of 0.5%.

At 109.4% of its 2012 average, total IP was 1.0% lower in December than it was a year earlier. 

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Industry Groups

Manufacturing output advanced 0.2% (NAICS manufacturing: +0.2% MoM; -1.3% YoY) in December but decreased at an annual rate of 1.0% in 4Q. The gain in December came despite a decrease of 4.6% for motor vehicles and parts; assemblies of light motor vehicles fell from 11.2 million units (annual rate) in November to 10.3 million units in December.

Excluding the motor vehicle sector, factory output rose 0.5%. The index for durable goods manufacturing slipped 0.2%, as the decrease for motor vehicles outweighed widespread increases in other industries (wood products: +1.1%). The index for nonmetallic mineral products advanced 2.3% for the largest gain among durables. The production of nondurables moved up 0.6%, led by increases of more than 1% for petroleum and coal products and for food, beverage, and tobacco products (paper products: +0.1%). The output of other manufacturing (publishing and logging) decreased 0.2%.

Mining output rose 1.3%, with most of the gain from oil and gas extraction; the index for mining rose at an annual rate of about 2% in 4Q to reverse a similarly sized decrease in 3Q. 

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Capacity utilization (CU) for the industrial sector fell 0.4 percentage point (PP) in December to 77.0%, a rate that is 2.8PP below its long-run (1972–2018) average.

Manufacturing CU edged up 0.1PP in December to 75.2%, about 3.1PP below its long-run average (NAICS manufacturing: 0.0%, at 75.7%; wood products: +0.8%; paper products: +0.1%). The utilization rate for mining increased to 89.6%, remaining above its long-run average of 87.1%. The operating rate for utilities fell to 73.5%, a rate that is about 12PP below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+2.1 % YoY) to 142.1% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.5% YoY) to 140.2%. Wood products: +0.3% (+4.1% YoY) to 169.2%; paper products: 0.0% (-0.3 % 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.