December 2020 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) advanced 1.6% in December (+0.4% expected), with gains of 0.9% for manufacturing, 1.6% for mining, and 6.2% for utilities. The increase for utilities resulted from a rebound in demand for heating after unseasonably warm weather in November. For 4Q as a whole, total IP rose at an annual rate of 8.4%. At 105.7% of its 2012 average, total industrial production in December was 3.6% lower than it was a year earlier and 3.3% below its pre-pandemic February reading.

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Industry Groups

Manufacturing output advanced 0.9% in December for its eighth consecutive monthly gain (NAICS manufacturing: +1.0% MoM; -2.6% YoY). For 4Q, manufacturing production rose at an annual rate of 11.2%. The index for motor vehicles and parts declined 1.6% in December but was nevertheless 3.6% higher than its year-earlier level. Excluding the motor vehicle sector, factory output moved up 1.1% as most manufacturing industries posted gains. The production of durable goods other than motor vehicles and parts rose 1.5%, and nondurable goods production increased 0.9%. Within durables, primary metals posted its seventh consecutive monthly increase; wood products: +2.3%. Within nondurables, plastics and rubber products posted the largest gain (3.2%), while printing and support recorded the only decrease (1.4%); paper products: +0.9%. The output of other manufacturing (publishing and logging) decreased 0.6%.

The index for mining increased 1.6% in December, as continued gains in the oil and gas sector (both extraction and drilling) outweighed declines elsewhere; even so, the index was still 12.3% below its level of a year earlier. For the fourth quarter, mining output rose 3.7% at an annual rate.

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Capacity utilization (CU) for the industrial sector rose 1.1 percentage points (PP) in December, to 74.5%, a rate that is 5.3PP below its long-run (1972–2019) average.

Manufacturing CU increased 0.7PP in December to 73.4%, 13.3PP higher than its trough in April but still 4.8PP below its long-run average (NAICS manufacturing: +1.0% MoM, to 74.0%; wood products: +2.3% MoM; paper products: +0.9% MoM). The operating rates for mining and utilities increased to 80.5% and 74.5%, respectively, but both remained well below their long-run averages.

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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 (-0.2% YoY) at 140.0%. Wood products: 0.0% (+0.4% YoY) at 169.8%; paper products: -0.1% (-0.8 % YoY) to 108.8%.

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.