April 2020 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) fell 11.2% in April (-11.5% expected) for its largest monthly drop in the 101-year history of the index, as the COVID-19 (coronavirus disease 2019) pandemic led many factories to slow or suspend operations throughout the month. Manufacturing output dropped 13.7%, its largest decline on record, as all major industries posted decreases. The output of motor vehicles and parts fell more than 70%; production elsewhere in manufacturing dropped 10.3%. The indexes for utilities and mining decreased 0.9% and 6.1%, respectively. At 92.6% of its 2012 average, the level of total industrial production was 15.0% lower in April than it was a year earlier. 

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Industry Groups

Manufacturing output dropped 13.7% in April (NAICS manufacturing: -13.8% MoM; -18.0% YoY). At 85.5% of its 2012 average, manufacturing production was at its lowest level since August 1997. The index for durable manufacturing fell 19.3%; among its components, the largest decline was posted by motor vehicles and parts. The shutdowns of most motor vehicle assembly plants led to light vehicle production at an annual rate of only 70,000 units, far below the assembly rate of 11.0 million units in February 2020. Among other durable goods industries, decreases of around 20% were recorded by primary metal products, by aerospace and miscellaneous transportation equipment, and by furniture and related products (wood products: --9.0%). The index for nondurables fell 8.2%, with declines of around 20% for textile and product mills, for apparel and leather, for printing and support, and for petroleum and coal products (paper products: -2.6%). The output of other manufacturing (publishing and logging) fell 10.4%.

The output of utilities weakened 0.9% in April, as a decrease for electric utilities was mostly offset by a gain for natural gas utilities that reflected strong demand for heating due to cold temperatures. Mining output fell 6.1%, with the largest decreases in crude oil extraction, in oil and gas well drilling, in coal mining, and in non-energy mining. The index for oil and gas well drilling fell 28%, its largest drop on record (since 1972). 

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Capacity utilization (CU) for the industrial sector decreased 8.3 percentage points (PP) to 64.9% in April, a rate that is 14.9PP below its long-run (1972–2019) average and 1.8PP below its all-time (since 1967) low set in 2009.

Manufacturing CU in April was 61.1%, 9.7PP lower than in March and 2.6PP below its recession trough of June 2009, the previous historical (since 1948) low for the measure (NAICS manufacturing: -13.8%, at 61.4%). The operating rate for durable manufacturing also dropped below its 2009 low to 55.3% and was held down by decreases in every major industry group (wood products: -9.2%). Likewise, capacity utilization for nondurables set a new low, falling 6.1PP to 68.0% (paper products: -2.6%). 

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Capacity at the all-industries level edged up 0.1% (+1.8 % YoY) to 142.7% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.3% YoY) to 140.7%. Wood products: +0.2% (+3.6% YoY) to 170.7%; 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.