March 2021 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) increased 1.4% in March (+2.8% expected). The gain in March followed a drop of 2.6% in February, which largely resulted from widespread outages related to severe winter weather in the south central region of the country. For 1Q2021 as a whole, total IP rose 2.5% at an annual rate. In March, manufacturing production and mining output increased 2.7% and 5.7%, respectively. The output of utilities dropped 11.4%, as the demand for heating fell because of a swing in temperatures from an unseasonably cold February to an unseasonably warm March.

At 105.6% of its 2012 average, total IP in March was 1.0% higher YoY, but 3.4% below its pre-pandemic (February 2020) level. 

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Industry Groups

Manufacturing output increased 2.7% in March, following a decline of 3.7% in February (NAICS manufacturing: +2.8% MoM; +3.4% YoY). For 1Q, factory output advanced 1.9% at an annual rate. In March, the indexes for durable and nondurable manufacturing increased 3.0% and 2.6%, respectively, while the index for other manufacturing (publishing and logging) was unchanged. All major categories of durables registered increases, most of which were between 2% and 3% (wood products: +2.4%). The output of motor vehicles and parts rose 2.8% in March after falling 10% in February. Shortages of semiconductors held down vehicle production in both months, while cold weather also curbed production in February.

Among nondurables, all major industry categories recorded gains except plastics and rubber products. The petroleum and coal products industry and the chemicals industry registered gains of 5.7% and 4.1%, respectively, after posting declines in February because of severe weather. The recovery in chemicals was incomplete in March, however, as some factories remained offline because of weather-related damage sustained during February. The indexes for all other nondurable goods industries increased between 0.9% and 3.0% in March (paper: +0.9%).

The drop of 11.4% for utilities in March was the largest in the history of this index (since 1972). Mining production increased 5.7%; oil and gas extraction accounted for most of the gain.

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Capacity utilization (CU) for the industrial sector increased 1.0 percentage point (PP) in March to 74.4%, a rate that is 5.2PP below its long-run (1972–2020) average.

Manufacturing CU increased 1.9PP in March to 73.8% (NAICS manufacturing: +2.8% MoM, to 74.4%; wood products: +2.3%; paper products: +0.8%). The operating rate for mining increased 4.5PP to 82.2%, while the operating rate for utilities decreased 9.0PP to 68.8%; 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 (-0.1% YoY) at 140.1%. Wood products: +0.1% (+0.3% YoY) to 170.1%; paper products: +0.1% (-0.5% YoY) at 109.0%.

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.