March 2020 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) fell 5.4% in March (-4.2% expected), as the coronavirus pandemic led many factories to suspend operations late in the month. Manufacturing output fell 6.3%; most major industries posted decreases, with the largest decline registered by motor vehicles and parts. The decreases for total IP and for manufacturing were their largest since January 1946 and February 1946, respectively. The indexes for utilities and mining declined 3.9% and 2.0%, respectively. At 103.7% of its 2012 average, the level of total IP in March was 5.5% lower than a year earlier. 

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Industry Groups

Manufacturing output dropped 6.3% in March and at an annual rate of 7.1% in the first quarter (NAICS manufacturing: -6.3% MoM; -6.4% YoY). In March, the index for durable manufacturing fell 9.1%; the most sizable decline among its components was in motor vehicles and parts, where output fell 28.0%. Durable goods industries that recorded decreases of between 8% and 10% included fabricated metal products, aerospace and miscellaneous transportation equipment, furniture and related products, and miscellaneous manufacturing (wood products: -4.2%). The index for nondurables fell 3.2%, with substantial declines in many industries but smaller decreases of 2% or less in food, beverage, and tobacco products; paper products (-2.0%); and chemicals. The output of other manufacturing (publishing and logging) fell 5.4%.

The output of utilities declined 3.9% in March, with similarly sized decreases for both electric and natural gas utilities. Mining output fell 2.0%, with the largest decreases in crude oil extraction, natural gas liquids extraction, coal mining, and non-energy mining. 

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Capacity utilization (CU) for the industrial sector decreased 4.3 percentage points (PP) to 72.7% in March, a rate that is 7.1PP below its long-run (1972–2019) average.

Manufacturing CU in March was 70.3%, 4.7PP lower than in February and 7.9PP below its long-run average (NAICS manufacturing: -6.3%, at 70.8%). The operating rate for durable manufacturing dropped to 67.8%, about 9PP below its long-run average, held down by decreases in every major industry group (wood products: -4.4%). Capacity utilization for nondurables fell 2.5PP to 73.9%, about 6PP below its long-run average (paper products: -2.0%). Utilization rates for printing and support, for textile and product mills, and for apparel and leather all recorded drops of nearly 10PP or more. 

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Capacity at the all-industries level edged up 0.1% (+1.9 % YoY) to 142.5% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.3% YoY) to 140.6%. Wood products: +0.2% (+3.7% YoY) to 170.3%; paper products: 0.0% (-0.2 % YoY) to 109.6%.

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.