July 2023 Industrial Production, Capacity Utilization and Capacity

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In July, total industrial production (IP) increased 1.0% (+0.3% expected) following declines in the previous two months. Manufacturing output rose 0.5% in July; the production of motor vehicles and parts jumped 5.2%, while factory output elsewhere edged up 0.1%. The index for mining moved up 0.5%, and the index for utilities climbed 5.4% as very high temperatures in July raised demand for cooling. At 102.9% of its 2017 average, total industrial production in July was 0.2% below its year-earlier level. 

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Market Groups

Most major market groups recorded growth in July. The production of consumer durables was boosted by a jump of 4.8% in the output of automotive products. Similarly, the abnormally hot weather in July lifted the indexes of energy consumer goods and energy materials, which advanced 3.7% and 2.1%, respectively. Elsewhere, there were gains of 1% in consumer nondurables, business equipment, as well as defense and space equipment. Of the major market groups, construction supplies recorded the only decline.

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Industry Groups

Manufacturing output rose 0.5% in July; however, the growth rates for the previous three months were revised down. Altogether, the index for manufacturing in July was 0.7% below its year-earlier level. In July, the indexes for durable and nondurable manufacturing increased 0.8% and 0.1%, respectively. Other manufacturing (publishing and logging) advanced 1.3%.

Within durable manufacturing, gains of 1% or more were registered by motor vehicles and parts (5.2%), machinery (1.3%), and computer and electronic products (1.0%). In contrast, losses of 1% or more were recorded by electrical equipment, appliances, and components (1.7%); primary metals (1.2%); and furniture and related products (1.2%). Within nondurable manufacturing, modest declines in the indexes of paper, of plastics and rubber products, and of apparel and leather were more than offset by gains elsewhere. Wood products: -0.7%; paper products: -0.7%.

Mining output grew 0.5% in July and was 2.0% above its year-earlier level. The output of utilities climbed 5.4% in July, bolstered by a jump of 6.7% for electric utilities.

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Capacity utilization (CU) moved up to 79.3% in July, a rate that is 0.4 percentage point (PP) below its long-run (1972–2022) average.

Manufacturing CU edged up to 77.8% in July, a rate that is 0.4PP below its long-run (1972–2022) average (wood products: +0.6%; paper: 0.0%). The operating rate for mining moved up 0.6PP to 92.4%, 6PP above its long-run average. The operating rate for utilities strengthened 3.5PP to 72.3%, well below its long-run average.

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Capacity at the all-industries level increased by 0.1% MoM (+1.6% YoY) to 129.7% of 2017 output. Manufacturing also edged up by 0.1% (+1.4% YoY) to 128.6%. Wood products: less than +0.1% (+1.1% YoY) to 120.1%; paper: -0.1% (-0.8% YoY) to 105.9%.

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.