September 2021 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) fell 1.3% in September (+0.2% expected) after moving down 0.1% in August; output was previously reported to have risen 0.4% in August. In September, manufacturing output decreased 0.7%: The production of motor vehicles and parts fell 7.2%, as shortages of semiconductors continued to hobble operations, while factory output elsewhere declined 0.3%. The output of utilities dropped 3.6%, as demand for cooling subsided after a warmer-than-usual August. Mining production fell 2.3%. At 100.0% of its 2017 average, total IP in September was 4.6% above its year-earlier level.

The lingering effects of Hurricane Ida more than accounted for the drop in mining in September; they also contributed 0.3 percentage point (PP) to the drop in manufacturing. Overall, about 0.6PP of the drop in total IP resulted from the impact of the hurricane.

Despite the decrease in September, total IP rose 4.3% at an annual rate for 3Q as a whole, its fifth consecutive quarter with a gain of at least 4%.

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Industry Groups

Manufacturing output fell 0.7% in September (NAICS manufacturing: -0.8% MoM; +5.1% YoY); even so, the index rose 5.3% at an annual rate in 3Q. Production of durable goods decreased 0.5% in September, with a drop of 7.2% for motor vehicles and parts. Outside of motor vehicles and parts, the production of durables moved up 0.5%, as gains of 1% or more were posted by primary metals; electrical equipment, appliances, and components; aerospace and miscellaneous transportation equipment; furniture and related products; and miscellaneous manufacturing (wood products: -0.6%). The output of nondurable goods fell 1.0%. The largest increases were recorded by printing and support and by textile and product mills (paper: +0.8%), while the largest decreases were recorded by chemicals and by petroleum and coal products. The output of other manufacturing (publishing and logging) declined 0.2%.

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Capacity utilization (CU) for the industrial sector fell 1.0PP in September to 75.2%, a rate that is 4.4PP below its long-run (1972–2020) average.

Manufacturing CU decreased 0.6PP in September to 75.9% (NAICS manufacturing: -0.8%, to 76.2%; wood products: -0.6%; paper products: +0.7%). The operating rate for mining fell 1.6PP to 73.9%, while the operating rate for utilities dropped 2.8PP to 73.0%. The rates for all three sectors remained below their long-run averages.

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Capacity at the all-industries level edged up by 0.1% MoM (+0.2% YoY) to 133.0% of 2017 output. NAICS manufacturing was unchanged (0.0% YoY) at 130.5%. Wood products: 0.0% (+0.3% YoY) at 123.1%; paper products: +0.1% (+0.6% YoY) to 113.7%.

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.