February 2021 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) decreased 2.2% in February (+0.5% expected). Manufacturing output and mining production fell 3.1% and 5.4%, respectively; the output of utilities increased 7.4%.

The severe winter weather in the south central region of the country in mid-February accounted for the bulk of the declines in output for the month. Most notably, some petroleum refineries, petrochemical facilities, and plastic resin plants suffered damage from the deep freeze and were offline for the rest of the month. Excluding the effects of the winter weather would have resulted in an index for manufacturing that fell about 1/2% and in an index for mining that rose about 1/2%. Both indexes would have remained below their pre-pandemic (February 2020) levels.

At 104.7% of its 2012 average, total IP in February was 4.2% lower than its year-earlier level. 

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Industry Groups

Manufacturing output decreased 3.1% in February (NAICS manufacturing: -3.1% MoM; -3.8% YoY). The indexes for durable, nondurable, and other (publishing and logging) manufacturing fell 2.6%, 3.7%, and 0.5%, respectively. Among durables, many industries experienced decreases of between 1 and 3% (wood products: -1.1%). The largest drop, 8.3%, was posted by motor vehicles and parts, while the only increases were recorded by primary metals and by aerospace and miscellaneous transportation equipment. The cutback in the output of motor vehicles and parts, which reflected both a global shortage of semiconductors and the severe weather, reduced overall manufacturing output about 1/2%. Among nondurables, most industries recorded losses (paper: -0.1%). The largest reductions occurred in those industries most affected by the weather: The indexes for chemicals and for petroleum and coal products decreased 7.1% and 4.4%, respectively.

The output of utilities increased 7.4% in February, as the extremely cold winter weather boosted demand for heating. Mining production decreased 5.4%; a drop of more than 6% for oil and natural gas extraction accounted for most of the loss. The index for oil and gas well drilling continued its climb with an advance of 6.4%, though it remained about 50% below its year-earlier level.

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Capacity utilization (CU) for the industrial sector decreased 1.7 percentage points (PP) in February to 73.8%, a rate that is 5.8PP below its long-run (1972–2020) average.

Manufacturing CU decreased 2.3PP in February to 72.3% (NAICS manufacturing: -3.1% MoM, to 72.9%; wood products: -1.1%; paper products: -0.1%). The operating rate for mining decreased 4.3PP to 77.5%, while the operating rate for utilities increased 5.2PP to 78.5%; both rates remained below their long-run averages.

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Capacity at the all-industries level was essentially unchanged MoM (-0.1 % YoY) at 141.9% of 2012 output. Manufacturing (NAICS basis) was also unchanged (-0.2% YoY) at 140.0%. Wood products: less than +0.1% (+0.4% YoY) to 170.0%; paper products: 0.0% (-0.6% YoY) at 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.