January 2023 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) was unchanged in January (+0.5% expected) after falling 0.6% and 1.0% in November and December, respectively. In January, manufacturing output moved up 1.0% (+0.4% expected) and mining output rose 2.0% following two months with substantial decreases for each sector. The output of utilities fell 9.9% in January, as a swing from unseasonably cool weather in December to unseasonably warm weather in January depressed the demand for heating. At 103.0% of its 2017 average, total industrial production in January was 0.8% above its year-earlier level. 

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Market Groups

Consumer energy products, commercial energy products, and energy materials all recorded substantial decreases because of the drop in the output of utilities. The output of most other market groups advanced. The indexes for consumer non-energy nondurables, business equipment, defense and space equipment, and nondurable materials all rose more than 1%; the indexes for consumer durables, construction supplies, non-energy business supplies, and durable materials increased between 1/2 and 1%.

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Industry Groups

Manufacturing output rose 1.0% in January (NAICS manufacturing: +0.9% MoM; +0.3% YoY). Durable, nondurable, and other manufacturing recorded advances of 0.8%, 1.1%, and 2.2%, respectively. Within durables, gains of at least 1% were recorded by nonmetallic mineral products, by machinery, by computer and electronic products, by electrical equipment, appliances, and components, and by aerospace and miscellaneous transportation equipment; wood products (-1.0%) and furniture posted the only losses. Gains of more than 1-1/2% were posted by chemicals and by food, beverage, and tobacco products, the two largest industry groups within nondurables (paper: +0.6%); declines in printing and support, in petroleum and coal products, and in plastics and rubber products tempered the overall gain for the sector.

Mining output rose 2.0% in January, with gains in most of its components other than oil and gas well drilling; the output of mines was 8.6% above its reading of 12 months earlier. The output of utilities dropped 9.9% in January, with decreases for both electric and natural gas utilities.

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Capacity utilization (CU) declined 0.1 percentage point (PP) in January to 78.3%, a rate that is 1.3PP below its long-run (1972–2022) average.

Manufacturing CU increased 0.6PP in January to 77.7%, a rate that is 0.5PP below its long-run average (wood products: -1.2%; paper: +0.7%). The operating rate for mining rose 1.6PP to 89.0%, while the operating rate for utilities fell 7.8PP to 68.6%. The rate for mining was 2.7PP above its long-run average. The rate for utilities was the lowest in the history of the index (since 1972).

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Capacity at the all-industries level increased by 0.1% MoM (+1.6% YoY) to 131.5% of 2017 output. Manufacturing also edged up by 0.1% (+1.2% YoY) to 129.6%. Wood products: +0.2% (+0.9% YoY) to 126.9%; paper: -0.1% (-0.7% YoY) to 109.7%.

The data in this release include preliminary estimates of industrial capacity for 2023. Measured from 4Q to 4Q, total industrial capacity is projected to rise 1.4% this year, a slightly slower increase compared with 2022. Manufacturing capacity is expected to move up 1.2% in 2023 after increasing 1.0% in 2022. Capacity in the mining sector is estimated to rise 0.5% in 2023 after jumping 3.5% in 2022. Capacity at electric and natural gas utilities is projected to increase 3.0% in 2023 after expanding 2.6% in 2022.

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.