Washington D.C., USA: Industrial production increased 0.3 percent (vs 0.2 percent expected) in September, about the same rate of change as in the previous two months, the Federal Reserve Board reported Tuesday.
Output growth in September was held down slightly by Hurricane Florence, with an estimated effect of less than 0.1 percentage point.
For the third quarter as a whole, total industrial production advanced at an annual rate of 3.3 percent. In September, manufacturing output moved up 0.2 percent for its fourth consecutive monthly increase, while the output of utilities was unchanged. The index for mining increased 0.5 percent and has moved up in each of the past eight months. At 108.5 percent of its 2012 average, total industrial production was 5.1 percent higher in September than it was a year earlier. Capacity utilization for the industrial sector was unchanged at 78.1 percent, a rate that is 1.7 percentage points below its long-run (1972–2017) average.
Production for most major market groups rose in September. The index for consumer goods moved up 0.2 percent, as increases in durables and in energy products were only partly offset by a decrease in non-energy nondurables. The indexes for business equipment and for defense and space equipment each advanced 0.8 percent; both categories posted sizable gains for the third quarter.
Among nonindustrial supplies, the index for construction supplies decreased in September, but the index for business supplies increased after declining in the previous two months. The output of industrial materials moved up 0.2 percent—its eighth straight monthly increase—as gains for energy and durable materials outweighed a loss in nondurable materials.
Manufacturing output moved up 0.2 percent in September. Factory output advanced 2.8 percent at an annual rate in the third quarter, a slightly faster gain than in the second quarter. In September, the indexes for durables and for other manufacturing (publishing and logging) rose, while the index for nondurables edged down. Production rose for most major categories within durable manufacturing. The largest increases were posted by motor vehicles and parts, wood products, and primary metals, while the only sizable decline was recorded by nonmetallic mineral products. Among nondurables, results were mixed, as the indexes for textile and product mills and for apparel and leather fell nearly 2 percent, but the indexes for printing and support and for petroleum and coal products rose about 1 percent.
Mining output increased 0.5 percent in September. The index has advanced about 24 percent from its trough in 2016, supported by gains in the oil and gas sector. The index for utilities was unchanged in September, as a decline in electric utilities offset an increase in natural gas utilities.
Capacity utilization for manufacturing edged up in September to 75.9 percent but was still 2.4 percentage points below its long-run average. The operating rates for durables and for other manufacturing increased, but the rate for nondurables decreased. The utilization rate for mining edged down to 92.1 percent but remained well above its long-run average. The utilization rate for utilities moved down to 77.7 percent and remained more than 7 percentage points below its long-run average.
Revision of Industrial Production and Capacity Utilization
The Federal Reserve Board plans to issue its annual revision to the index of industrial production (IP) and the related measures of capacity utilization around the end of the first quarter of 2019. The Economic Census for 2017 will not be available from the U.S. Census Bureau by early 2019, so no new annual benchmark data will be included for manufacturing. Other annual data, including information on the mining of metallic and nonmetallic minerals (except fuels), will be incorporated. The updated IP indexes will include revisions to the monthly indicator (either product data or input data) and to seasonal factors for each industry. In addition, the estimation methods for some series may be changed. Any modifications to the methods for estimating the output of an industry will affect the index from 1972 to the present.
Capacity and capacity utilization will be revised to incorporate data through the fourth quarter of 2018 from the U.S. Census Bureau’s Quarterly Survey of Plant Capacity Utilization along with new data on capacity from the U.S. Geological Survey, the U.S. Department of Energy, and other organizations.
Note. The statistics in this release cover output, capacity, and capacity utilization in the U.S. industrial sector, which is defined by the Federal Reserve to comprise manufacturing, mining, and electric and gas utilities. Mining is defined as all industries in sector 21 of the North American Industry Classification System (NAICS); electric and gas utilities are those in NAICS sectors 2211 and 2212. Manufacturing comprises NAICS manufacturing industries (sector 31-33) plus the logging industry and the newspaper, periodical, book, and directory publishing industries. Logging and publishing are classified elsewhere in NAICS (under agriculture and information, respectively), but historically they were considered to be manufacturing and were included in the industrial sector under the Standard Industrial Classification (SIC) system. In December 2002 the Federal Reserve reclassified all its industrial output data from the SIC system to NAICS.
Officials at the Fed tend to look at capacity use measures for signals of how much “slack” remains in the economy how far growth has room to run before it becomes inflationary.
The Fed’s monthly data are volatile and often get revised. Manufacturing, which makes up 75 percent of total industrial production, accounts for about 12 percent of the U.S. economy
Industrial production, also called, factory output measures change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities;
It’s a leading indicator of economic health – production reacts quickly to ups and downs in the business cycle and is correlated with consumer conditions such as employment levels and earnings.