October 2020 Industrial Production, Capacity Utilization and Capacity

Click image for larger version

Total industrial production (IP) rose 1.1% in October (+0.9% expected). The index has recovered much of its 16.5% decline from February to April, but output in October was still 5.6% lower than its pre-pandemic February level. After edging up 0.1% in September, manufacturing output increased 1.0% in October. The output of utilities rose 3.9%, while the output at mines declined 0.6% to a level that was 14.4% below its year-earlier reading. At 103.2% of its 2012 average, total IP was 5.3% lower in October than it was a year earlier.

Click image for larger version

Click image for larger version

Industry Groups

Manufacturing output increased 1.0% in October; even so, it was about 5% below its level in February (NAICS manufacturing: +1.0% MoM; -3.6% YoY). The index for durable manufacturing stepped up 0.9%, as small drops in the indexes for furniture and related products, fabricated metal products, and motor vehicles and parts were outweighed by gains elsewhere, especially for aerospace and miscellaneous transportation equipment and for miscellaneous manufacturing (wood products: +0.5%). The index for nondurables rose 1.2%; nearly all of its components posted gains (paper products: +2.2%). The output of other manufacturing (publishing and logging) fell 1.5%.

The index for utilities moved up 3.9% in October, with an increase for electric utilities more than offsetting a decrease for natural gas utilities. Mining output declined 0.6%, as oil and gas extraction fell back in October after posting a gain in September.

Click image for larger version

Capacity utilization (CU) for the industrial sector increased 0.8 percentage point (PP) in October to 72.8%, a rate that is 7.0PP below its long-run (1972–2019) average but 8.6PP above its low in April.

Manufacturing CU rose 0.7PP in October to 71.7%, 11.6PP higher than its trough in April but still 6.5PP below its long-run average (NAICS manufacturing: +1.1% MoM, to 72.3%; wood products: +0.5% MoM; paper products: +2.3% MoM). The utilization rate for mining declined to 77.9%, remaining below its long-run average of 87.2%. The operating rate for utilities increased to 72.7%, a rate that is 12.5PP below its long-run average.

Click image for larger version

Capacity at the all-industries level was essentially unchanged MoM (+0.0 % YoY) at 141.9% of 2012 output. Manufacturing (NAICS basis) was also unchanged (+0.1% YoY) at 140.0%. Wood products: 0.0% (+1.0% YoY) at 169.8%; paper products: -0.1% (-0.7 % YoY) to 106.9%.

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.