June 2023 Industrial Production, Capacity Utilization and Capacity

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Total industrial production (IP) declined 0.5% in June for a second consecutive month (0.0% expected) but advanced 0.7% at an annual rate for 2Q as a whole. Manufacturing output moved down 0.3% in June but rose 1.5% in 2Q. In June, the indexes for mining and utilities fell 0.2% and 2.6%, respectively. At 102.2% of its 2017 average, total IP in June was 0.4% below its year-earlier level. 

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Market Groups

Most major market groups posted declines in June. The index for consumer durables fell 2.7%, led by notable decreases in the output of appliances, furniture, and carpeting (3.8%) and of automotive products (3.6%). The decrease of 0.9% in the index for consumer nondurables reflected declines in clothing (2.1%), energy (1.8%), and food and tobacco (1.3%). Within business equipment, an increase in the index for information processing was offset by decreases in the indexes for transit and for industrial and other. Defense and space equipment posted the only gain of 1.5% or greater among the market groups.

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Industry Groups

Manufacturing output moved down 0.3% in June. For the second quarter, factory output moved up 1.5% at an annual rate, buttressed by a second-quarter jump of 36.7% in the production of motor vehicles and parts during the quarter. In June, the indexes for nondurable manufacturing and durable manufacturing fell 0.6% and 0.1%, respectively; the index for other manufacturing (publishing and logging) edged down 0.2%. Within nondurables, only chemicals recorded an increase, whereas decreases of at least 1% were recorded by most other industries (paper products: 0.0%). Notable declines occurred in the indexes for printing and support (2.5%) and petroleum and coal products (1.6%). The index for durable manufacturing, on the other hand, posted more mixed results in June, with declines in the output of motor vehicles and parts (3.0%) and of nonmetallic mineral products (1.2%) being mostly offset by gains elsewhere (wood products: +1.9%).

Mining output inched down 0.2% in June and declined 1.1% at an annual rate in 2Q. Within mining, a drop of 2.8% in the index for oil and gas well drilling in June was nearly offset by a gain in oil and gas extraction. The output of utilities fell 2.6% in June and 2.0% in 2Q.

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Capacity utilization (CU) stepped down to 78.9% in June, a rate that is 0.8 percentage point (PP) below its long-run (1972–2022) average.

Manufacturing CU edged down to 78.0% in June, a rate that is 0.2PP below its long-run (1972–2022) average (wood products: +1.8%; paper: +0.1%). The operating rate for mining ticked down 0.1PP to 91.6%, and the operating rate for utilities dropped 2.1PP to 68.5%. The rate for mining was 5.2PP above its long-run average, while the rate for utilities remained 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 129.6% of 2017 output. Manufacturing also edged up by 0.1% (+1.4% YoY) to 128.5%. Wood products: 0.0% (+1.2% YoY) at 120.0%; paper: -0.1% (-0.8% YoY) to 106.0%.

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.