January 2022 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) increased 1.4% in January (+0.4% expected). Manufacturing output and mining production rose 0.2% and 1.0%, respectively. The index for utilities jumped 9.9%; after being held down in December by unusually mild weather, the demand for heating surged in January with the arrival of significantly colder-than-normal temperatures. At 103.5% of its 2017 average, total industrial production in January was 4.1% higher than its year-earlier level and 2.1% above its pre-pandemic (February 2020) reading. 

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Industry Groups

Manufacturing output rose 0.2% in January and was up 2.5% over the past 12 months (NAICS manufacturing: +0.2% MoM; +2.7% YoY). In January, durable manufacturing, nondurable manufacturing, and other manufacturing (publishing and logging) each recorded increases of 0.2%. Within durables, miscellaneous manufacturing and machinery posted the largest gains, while motor vehicles and parts and nonmetallic mineral products posted the largest losses (wood products: +0.2%). Within nondurables, sizable increases were recorded by textile and product mills; food, beverage, and tobacco products; and paper (+0.8%). The largest losses came in the indexes for printing and support and for petroleum and coal products, which both declined around 1.5%.

The increase of 9.9% in the output of utilities in January was the largest in the history of the index (since 1972) and reflected strength for both electric utilities and natural gas utilities. The index for mining rose 1.0%. Oil and gas well drilling advanced 6.2%; the index in January was nearly 50% above its year-earlier level but still about 14% below its pre-pandemic reading.

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Capacity utilization (CU) for the industrial sector increased 1.0 percentage point (PP) in January to 77.6%, a rate that is 1.9PP below its long-run (1972–2021) average.

Manufacturing CU increased 0.1PP in January to 77.3%, 1.8PP higher than its pre-pandemic level but still 0.8PP below its long-run average (NAICS manufacturing: +0.2%, to 77.6%; wood products: 0.0%; paper: +0.9%). The operating rate for mining rose 0.5PP to 79.1%, and the operating rate for utilities advanced 6.9PP to 78.1%. Despite these gains, both rates remained below their long-run averages.

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Capacity at the all-industries level increased by 0.1% MoM (+0.5% YoY) to 133.3% of 2017 output. NAICS manufacturing also edged up 0.1% (+0.4% YoY) to 130.8%. Wood products: 0.0% (+0.3% YoY) at 123.5%; paper: -0.1% (+0.8% YoY) to 113.9%.

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.