July 2021 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) increased 0.9% in July (+0.5% expected) after moving up 0.2% in June. In July, manufacturing output rose 1.4%. About half of the gain in factory output is attributable to a jump of 11.2% for motor vehicles and parts, as a number of vehicle manufacturers trimmed or canceled their typical July shutdowns. Despite the large increase last month, vehicle assemblies continued to be constrained by a persistent shortage of semiconductors; the production of motor vehicles and parts in July was about 3½% below its recent peak in January 2021. The output of utilities decreased 2.1% in July, while the index for mining rose 1.2%. At 101.1% of its 2017 average, total industrial production in July was 6.6% above its year-earlier level but 0.2% below its pre-pandemic (February 2020) level. 

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Industry Groups

In July, manufacturing output increased 1.4%; excluding the large gain in motor vehicles and parts, manufacturing output moved up 0.7%. The index for overall manufacturing in July was 0.8% above its pre-pandemic level. Production of durable goods rose 2.4% in July. In addition to the increase for motor vehicles and parts, gains of 1.5% or more were recorded by machinery; electrical equipment, appliances, and components; aerospace and miscellaneous transportation equipment; and miscellaneous manufacturing (wood products: +0.1%). The output of nondurable goods rose 0.3%; the largest increases were recorded by textile and product mills and by plastics and rubber products (paper: +1.0%). The output of other manufacturing (publishing and logging) increased 0.2%. The index for mining advanced 1.2%, about the same pace it has averaged over the past 12 months. The index for utilities fell 2.1% in July, as an unusually hot June gave way to a July with temperatures somewhat below normal.

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Capacity utilization (CU) for the industrial sector rose 0.7 percentage point (PP) in July to 76.1%, a rate that is 3.5PP below its long-run (1972–2020) average.

Manufacturing CU increased 1.1PP in July to 76.6% (NAICS manufacturing: +1.3%, to 76.8%; wood products: +0.1%; paper products: +0.9%). The operating rate for mining rose 1.0PP to 76.9%, while the operating rate for utilities decreased 1.7PP to 72.6%. The rates for all three sectors remained below their long-run averages.

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Capacity at the all-industries level was unchanged MoM (+0.1% YoY) at 132.8% of 2017 output. NAICS manufacturing was also unchanged (0.0% YoY) at 130.4%. Wood products: 0.0% (+0.4% YoY) at 123.1%; paper products: +0.1% (+0.2% YoY) to 113.5%.

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.