December 2022 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) decreased 0.7% in December (-0.1% expected) and 1.7% at an annual rate in 4Q; for 2022 overall, total IP was 3.9% above its average 2021 rate. In December, manufacturing output fell 1.3% amid widespread declines across the sector. The index for utilities jumped 3.8%, as cold temperatures boosted the demand for heating, while the index for mining moved down 0.9%. At 103.4% of its 2017 average, total IP in December was 1.6% above its year-earlier level. 

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Market Groups

The indexes for all major market groups except defense and space equipment decreased for a second consecutive month in December. Business equipment recorded the largest drop (2.0%), followed by construction supplies (1.4%) and business supplies (1.3%). The index for materials fell 0.7%, as a loss for non-energy materials offset a modest gain for energy materials. The index for consumer goods edged down 0.1%, with an increase for consumer energy products mostly offsetting decreases for durable and non-energy nondurable goods. The index for defense and space equipment rose 1.0% in December and increased 14.0% at an annual rate in 4Q.

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Industry Groups

Manufacturing output fell 1.3% in December and moved down 2.5% at an annual rate in 4Q. In December, the indexes for durable and nondurable manufacturing dropped 1.1% and 1.5%, respectively, while the index for other manufacturing (publishing and logging) stepped down 0.9%. Within durables, most major industries posted declines of at least 1%; machinery (-3.4%) and wood products (-2.1%) recorded the largest declines. Within nondurables, the indexes for all major industries declined, with the indexes for printing and support and for petroleum and coal products contracting more than 3% (paper: -1.6%).

Mining output declined 0.9% in December; the index edged up 0.7% at an annual rate in 4Q, a notable step-down from its rates of increase in 2-3Q. The output of utilities jumped 3.8% in December, driven by increases for both electric and natural gas utilities.

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Capacity utilization (CU) dropped 0.6 percentage point (PP) in December to 78.8%, a rate that is 0.8PP below its long-run (1972–2021) average.

Manufacturing CU decreased 1.0PP in December to 77.5%, a rate that is 0.7PP below its long-run average (wood products: -2.1%; paper: -1.5%). The operating rate for mining fell 0.9PP to 87.7%, while the operating rate for utilities jumped 2.7PP to 76.8%. The rate for mining was 1.4PP above its long-run average, while the rate for utilities remained substantially below its long-run average.

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Capacity at the all-industries level increased by 0.1% MoM (+1.6% YoY) to 131.3% of 2017 output. Manufacturing also edged up by 0.1% (+1.2% YoY) to 129.5%. Wood products: +0.1% (+0.9% YoY) to 126.6%; paper: -0.1% (-0.6% YoY) to 109.9%.

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.