February 2022 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) rose 0.5% in February (+0.5% expected) to a level that is 103.6% of its 2017 average. Manufacturing output increased 1.2% after having been little changed in each of the previous two months. In February, the index for utilities declined 2.7%, and the output of mines edged up 0.l%.

Total industrial production in February was 7.5% higher than its year-earlier level, but severe winter weather in February 2021 significantly suppressed industrial activity that month. A more useful comparison shows that the index has advanced a still-strong 4.2% since January 2021. 

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Industry Groups

Manufacturing output rose 1.2% in February (NAICS manufacturing: +1.2% MoM; +7.8% YoY). The indexes for durable and nondurable manufacturing moved up 1.3% and 1.1%, respectively, while the output of other manufacturing (publishing and logging) moved down 0.4%. Most major durable and nondurable goods industry groups posted gains (wood products: +2.6%; paper: +1.6%). An exception was the output of motor vehicles and parts, which declined 3.5% and continued to be restrained by a shortage of electronic components. In February, the indexes for most industry groups were higher than in the beginning of 2021; notable exceptions were the indexes for motor vehicles and parts and for other manufacturing (publishing and logging).

The decrease of 2.7% in the output of utilities in February reflected a return to more seasonable weather following a colder-than-average January. In February, the index for mining was little changed, as a decline in oil and gas extraction was offset by an increase in support activity for oil and gas operations. The index for mining in February was about 7% above its level at the beginning of last year but still about 7% below its pre-pandemic (February 2020) reading.

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Capacity utilization (CU) for the industrial sector increased 0.3 percentage point (PP) in February to 77.6%, a rate that is 1.9PP below its long-run (1972–2021) average.

Manufacturing CU increased 0.9PP in February to 78.0%, 2.5PP higher than its pre-pandemic level but 0.1PP below its long-run average (NAICS manufacturing: +1.2%, to 78.2%; wood products: +2.4%; paper: +1.6%). The operating rate for mining edged down 0.1PP to 78.0%, and the operating rate for utilities declined 2.2PP to 75.7%. Both rates remained well below their long-run averages.

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Capacity at the all-industries level increased by 0.1% MoM (+0.6% YoY) to 133.4% of 2017 output. NAICS manufacturing also edged up 0.1% (+0.4% YoY) to 130.8%. Wood products: +0.1% (+0.5% YoY) to 123.6%; paper: 0.0% (+0.7% YoY) at 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.