January 2019 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) decreased 0.6% in January (+0.2% expected) after rising 0.1% in December (originally +0.3%). In January, manufacturing production fell 0.9%, primarily as a result of a large drop in motor vehicle assemblies; factory output excluding motor vehicles and parts decreased 0.2%. The indexes for mining and utilities moved up 0.1% and 0.4%, respectively. At 109.4% of its 2012 average, total IP was 3.8% higher in January than it was a year earlier. 

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Industry Groups

Manufacturing output decreased 0.9% in January to a level that was, nonetheless, 2.9% above a year earlier (NAICS manufacturing: -0.9% MoM; +3.1%YoY). The output of durable goods moved down 1.7% because of a sizable drop for motor vehicles. The index for motor vehicles and parts fell 8.8%, as vehicle assemblies fell from 12.3 million units at an annual rate in December (their highest monthly pace since June 2016) to 10.6 million units in January (their lowest reading since May 2018). Most other major durable goods industries also recorded decreases (wood products: -0.4%); only fabricated metal products and furniture posted gains. The output of nondurables was unchanged; its components posted mixed results (paper products: +0.1%), with only petroleum and coal products recording an increase of more than 1% and only apparel and leather recording a decrease of more than 1%. The output of other manufacturing (publishing and logging) rose 0.5%.

Mining output edged up 0.1% in January; the index for mining was 15.3% above its level of a year earlier. The output of utilities increased 0.4% in January, with natural gas utilities rising 6% after falling 19% in December. 

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Capacity utilization (CU) for the industrial sector decreased 0.6 percentage point (PP) in January to 78.2%, a rate that is 1.6PP below its long-run (1972–2018) average.

Manufacturing CU declined 0.7PP in January to 75.8%, about 2.5PP below its long-run average (NAICS manufacturing: -1.0%, to 76.4%; wood products: -0.4%; paper products: +0.2%). The utilization rate for mining fell to 94.8% but remained well above its long-run average of 87.1%. The operating rate for utilities increased to 75.4%, a rate that is about 10PP below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+2.2 % YoY) to 139.9% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.5% YoY) to 139.2%. Wood products: 0.0% (+3.4% YoY) to 164.3%; paper products: 0.0% (-0.9 % YoY) to 110.3%.

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.