November 2020 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) increased 0.4% in November (+0.3% expected). After having fallen 16.5% between February and April, the level of the index has risen to about 5% below its pre-pandemic (February) reading. In November, manufacturing output advanced 0.8% for its seventh consecutive monthly gain. An increase of 5.3% for motor vehicles and parts contributed significantly to the gain in factory production; excluding motor vehicles and parts, manufacturing output moved up 0.4%. The output of utilities declined 4.3%, as warmer-than-usual temperatures reduced the demand for heating. Mining production increased 2.3% after decreasing 0.7% in October. At 104.0% of its 2012 average, total industrial production was 5.5% lower in November than it was a year earlier.

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Industry Groups

Manufacturing output increased 0.8% in November to a level that was 3.8% below its pre-pandemic reading (NAICS manufacturing: +0.8% MoM; -3.5% YoY). The index for durable manufacturing rose 1.5% with widespread gains across its components. In addition to the large increase for motor vehicles and parts, output moved up notably for primary metals, for computers and electronics, for aerospace and miscellaneous transportation equipment, and for miscellaneous manufacturing (wood products: +0.3%). The index for nondurables edged up 0.1% in November after posting an increase of 1.4% in October. In November, increases in the indexes for food, beverage, and tobacco products and for paper products (+2.0%) more than offset declines elsewhere. The output of other manufacturing (publishing and logging) fell 1.2%.

The index for utilities dropped 4.3% in November, with declines for both electric and natural gas utilities. Mining production rose 2.3%; all of its major components posted gains of more than 1-1/2%.

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Capacity utilization (CU) for the industrial sector increased 0.3 percentage point (PP) in November, to 73.3%, a rate that is 6.5PP below its long-run (1972–2019) average but 9.1PP above its low in April.

Manufacturing CU moved up 0.6PP in November to 72.6%, 12.5PP higher than its trough in April but still 5.6PP below its long-run average (NAICS manufacturing: +0.8% MoM, to 73.1%; wood products: +0.3% MoM; paper products: +2.1% MoM). The utilization rate for mining increased to 79.4%; it remained well below its long-run average of 87.2%. The operating rate for utilities declined to 70.2%, a rate that is 15.0PP below its long-run average.

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Capacity at the all-industries level was essentially unchanged MoM (+0.0 % YoY) at 141.8% of 2012 output. Manufacturing (NAICS basis) was also unchanged (-0.1% YoY) at 140.0%. Wood products: 0.0% (+0.7% YoY) at 169.8%; paper products: -0.1% (-0.8 % YoY) to 108.9%.

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.