May 2019 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) rose 0.4% in May (+0.2% expected) after falling 0.4% in April (originally -0.5%); also, the rates of change for the five previous months were again revised down on net. The indexes for manufacturing and mining gained 0.2% and 0.1%, respectively, in May; the index for utilities climbed 2.1%. At 109.6% of its 2012 average, total industrial production was 2.0% higher in May than it was a year earlier. 

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Industry Groups

Manufacturing output increased 0.2% in May after having decreased about 0.4% per month, on average, in the first four months of the year (NAICS manufacturing: +0.2% MoM; +0.9% YoY). In May, the production of durable goods rose 0.3%, while the output of nondurable goods edged up 0.1%. Among durables, gains of more than 1% were posted by wood products (+1.3%); machinery; electrical equipment, appliances, and components; and motor vehicles and parts. These increases were partially offset by decreases in primary metals and in aerospace and miscellaneous transportation equipment. Among nondurables, the only gain greater than 1% was recorded by plastics and rubber products (paper products: +0.2%), and the only decline greater than 1% was recorded by apparel and leather products. The index for other manufacturing (publishing and logging) decreased 0.9% last month; it has fallen 6.5% during the past 12 months.

The output of utilities increased 2.1% in May, with identically sized gains in the indexes for both natural gas and electric utilities. Mining output inched up 0.1% in May and was 10.0% above its level of a year earlier. The increase in the mining index for May reflected gains in oil and natural gas extraction that were mostly offset by a large decline for oil and gas well drilling. 

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Capacity utilization (CU) for the industrial sector moved up 0.2 percentage point (PP) in May to 78.1%, a rate that is 1.7PP below its long-run (1972–2018) average.

Manufacturing CU moved up 0.1PP in May to 75.7%, a rate that is 2.6PP below its long-run average (NAICS manufacturing: +0.1%, to 76.2%). The utilization rates for durable and nondurable manufacturing were little changed (wood products: +1.0%; paper products: +0.2%), while the rate for other manufacturing (publishing and logging) slipped 0.4PP. Capacity utilization for mining dipped to 91.3% but remained well above its long-run average of 87.1%. The operating rate for utilities jumped to 77.5%; even so, it was still about 8PP below its long-run average. 

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Capacity at the all-industries level nudged up 0.2% (+2.1 % YoY) to 140.3% of 2012 output. Manufacturing (NAICS basis) rose fractionally (+0.1% MoM; +1.2% YoY) to 139.0%. Wood products: +0.3% (+3.8% YoY) to 165.1%; paper products: 0.0% (-0.7 % YoY) to 109.8%.

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.