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Total industrial production (IP) rose 5.4% in June (+4.3% expected) after increasing 1.4% in May; even so, it remained 10.9% below its pre-pandemic February level. For 2Q2020 as a whole, the index fell 42.6% at an annual rate, its largest quarterly decrease since the industrial sector retrenched after World War II. Manufacturing output climbed 7.2% in June, as all major industries posted increases. The largest gain—105.0%—was registered by motor vehicles and parts, while factory production elsewhere rose 3.9%. Mining production fell 2.9%, and the output of utilities increased 4.2%. At 97.5% of its 2012 average, the level of total industrial production was 10.8% lower in June than it was a year earlier.
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Industry Groups
Manufacturing
output increased 7.2% in June, but it was still 11.1% below its pre-pandemic
February level; factory output fell 47.0% at an annual rate in 2Q (NAICS manufacturing: +7.4% MoM; -11.0% YoY).
The index for durable manufacturing rose 11.6% in June (wood products: +1.7%). Despite substantial gains in the past two
months, the output of motor vehicles and parts remained nearly 25% below its
February level. The index for nondurables rose 3.4%, with sizable gains for
apparel and leather and for plastics and rubber products (paper products: +3.4%). The output of other manufacturing
(publishing and logging) increased 2.2%.
The output of utilities rose 4.2% in June, as both gas and electric utilities posted gains. Mining output fell 2.9%, with declines in nearly all categories. The index for oil and gas well drilling fell 18.0% in June and was about 70% below its year-earlier level. For the second quarter, mining output declined 42.7% at an annual rate.
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Capacity
utilization (CU) for the industrial sector increased 3.5 percentage points (PP)
to 68.6% in June, a rate that is 11.2PP below its long-run (1972–2019) average
but 1.9PP above its trough during the Great Recession.
Manufacturing CU in June was 66.9%, 4.6PP higher than in May and 3.2PP above its recession trough of June 2009 (NAICS manufacturing: +7.4%, to 67.4%). The operating rate for durable manufacturing increased 6.7PP in June to 64.3%, 5.9PP above its 2009 low (wood products: +1.6%). Capacity utilization for nondurables rose 2.4PP to 70.6%, 1.8PP above its 2009 low (paper products: +3.4%). The operating rate for mining fell to 75.0%, somewhat below its low in 2016 but slightly above its historical low in 1986.
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Capacity
at the all-industries level was unchanged MoM (+1.0 % YoY) at 142.0% of 2012
output. Manufacturing (NAICS basis) was also unchanged (+0.7% YoY) to 140.2%. Wood products: 0.0% (+2.3% YoY) at 169.7%;
paper products: -0.1% (-0.5 % YoY) to
109.3%.
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.
