January 2024 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) edged down 0.1% in January (+0.2% expected) after recording no change in December. In January, manufacturing output declined 0.5% and mining output fell 2.3%; winter weather contributed to the declines in both sectors. The index for utilities jumped 6.0%, as demand for heating surged following a move from unusually mild temperatures in December to unusually cold temperatures in January. At 102.6% of its 2017 average, total IP in January was identical to its year-earlier level. 

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Market Groups

The major market groups posted mixed results in January. The index for consumer goods rose 0.6% with modest gains in its durable and nondurable components. The indexes for business equipment, construction supplies, and business supplies all declined less than 1%; the index for construction supplies was 4.1% below its year-earlier level. Meanwhile, the output of defense and space equipment continued to post solid growth in January and was over 13% above its year-earlier level. Materials output decreased 0.4% in January, as the non-energy component decreased 0.7%, while the energy component edged up 0.1%.

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Industry Groups

Manufacturing output fell 0.5% in January; the index for durable manufacturing edged up 0.1%, while the index for nondurable manufacturing fell 1.1%. The index for other manufacturing (publishing and logging) moved down 0.2%. Among durables, the largest gains were recorded in electrical equipment, appliances, and components as well as in aerospace and miscellaneous transportation equipment. Computer and electronic products also moved up in January, in part based on the continued strength in semiconductor production. Nonmetallic mineral products and primary metals recorded declines of around 1%; wood products: -0.7%. Declines were widespread among nondurables, with notable weather-related decreases in the indexes of petroleum and coal products, chemicals, and plastics and rubber products; paper: -1.9%.

In January, mining output fell 2.3% amid a weather-related pullback in oil and gas extraction and a drop in coal production. The output of utilities jumped 6.0% as electric and natural gas utilities output increased 4.7 and 13.9%, respectively.

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Capacity utilization (CU) for the industrial sector moved down 0.2 percentage point (PP) in January to 78.5%, a rate that is 1.1PP below its long-run (1972–2023) average.

Manufacturing CU decreased to 76.6% in January, a rate that is 1.6PP below its long-run average (wood products: -0.8%; paper: -1.9%). The operating rate for mining decreased 2.3PP to 92.2%, a rate that is 5.7PP above its long-run average. The operating rate for utilities moved up 4.0PP to 74.2%, well below its long-run average of 84.4%.

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Capacity at the all-industries level edged up by 0.1% MoM (+1.4% YoY) to 130.6% of 2017 output. Manufacturing also increased by 0.2% (+1.5% YoY) to 129.6%. Wood products: +0.1% (+0.4% YoY) at 120.2%; paper products: unchanged (-1.0% YoY) at 105.3%.

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.