December 2021 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) declined 0.1% in December (+0.3% expected). Losses of 0.3% for manufacturing and 1.5% for utilities were mostly offset by a gain of 2.0% for mining. For 4Q overall, total IP rose at an annual rate of 4.0%. At 101.9% of its 2017 average, total IP in December was 3.7% higher than at the end of 2020 and 0.6% above its pre-pandemic (February 2020) reading. 

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Industry Groups

Manufacturing production declined 0.3% in December but was up 3.5% over the past 12 months (NAICS manufacturing: -0.3% MoM; +3.7% YoY); in 4Q, factory output rose nearly 5% at an annual rate. The index for motor vehicles and parts stepped down 1.3% in December and was about 6% lower than its year-earlier level. Excluding the motor vehicle sector, factory output dipped 0.2%, with similarly sized decreases for durables and nondurables. Within durables, miscellaneous manufacturing recorded the largest decrease (2.7%), while wood products and nonmetallic mineral products posted the largest increases (1.2% and 1.5%, respectively). Within nondurables, chemicals posted the largest gain (0.7%), but most other subcategories recorded losses of between 1 and 2% (paper: -1.2%). The output of other manufacturing (publishing and logging) decreased 0.8%.

The index for mining increased 2.0% in December, primarily reflecting gains in the oil and gas sector. Mining output rose more than 15% at an annual rate in the fourth quarter and has risen more than 10% from its level of a year earlier. Even so, the index for mining in December was about 6% below its pre-pandemic level.

The decrease of 1.5% in the index for utilities in December primarily resulted from a drop in the output of gas utilities, as warmer-than-normal temperatures reduced demand for heating.

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Capacity utilization (CU) for the industrial sector edged down 0.1 percentage point (PP) in December to 76.5%, a rate that is 3.1PP below its long-run (1972–2020) average.

Manufacturing CU decreased 0.2PP in December to 77.0%, 1.5PP higher than its pre-pandemic level but still 1.2PP below its long-run average (NAICS manufacturing: -0.3%, to 77.2%; wood products: +1.2%; paper: -1.3%). The operating rates for mining and utilities increased to 79.1% and 71.0%, respectively, but both remained well below their long-run averages.

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Capacity at the all-industries level increased by 0.1% MoM (+0.4% YoY) to 133.2% of 2017 output. NAICS manufacturing edged up less than 0.1% (+0.3% YoY) to 130.7%. Wood products: 0.0% (+0.3% YoY) at 123.2%; paper: +0.1% (+0.9% YoY) to 114.0%.

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.