Industrial Production and Capacity Utilization

Release Date: September 17, 2002
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INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION
[2002 Revision Notice Below]

Industrial production fell 0.3 percent in August, its first decline since December 2001 and a partial reversal of the 0.4 percent increase now reported for July. At 140.5 percent of its 1992 average, industrial production in August was 2.8 percent above its December 2001 trough. Manufacturing output decreased 0.1 percent in August, while production at mines rose 0.8 percent. Although temperatures in August were still relatively high, the output of utilities dropped back 2.5 percent from July's elevated level. Capacity utilization for total industry was 76.0 percent, a rate that has remained essentially flat for the last three months.

 INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION:  SUMMARY
 Seasonally adjusted
 -----------------------------------------------------------------------------------------------------------------------------------
                               |                    1992=100                     |                  Percent change
                               | ----------------------------------------------- | -------------------------------------------------
                               |       2002                                      |   2002                          |    Aug. '01 to 
 Industrial production         |        May        June        July        Aug.  |    May    June    July    Aug.  |      Aug. '02 
 -----------------------------------------------------------------------------------------------------------------------------------
                               |                                                 |                                 |
  Total index                  |      139.4       140.3       140.9       140.5  |     .5      .6      .4     -.3  |             .4 
     Previous estimates        |      139.5       140.4       140.7              |     .5      .7      .2          |                
                               |                                                 |                                 |
  Major market groups:         |                                                 |                                 |
  Products, total              |      127.3       128.0       128.3       128.0  |     .2      .6      .2     -.3  |           -1.1 
     Consumer goods            |      121.4       122.3       123.0       122.4  |     .0      .7      .6     -.5  |             .9 
     Business equipment        |      163.2       164.2       163.7       163.1  |     .2      .6     -.3     -.4  |           -5.9 
     Construction supplies     |      139.6       140.2       138.3       139.2  |     .9      .5    -1.4      .6  |             .3 
  Materials                    |      160.2       161.3       162.5       162.2  |     .9      .6      .8     -.2  |            3.0 
                               |                                                 |                                 |
  Major industry groups:       |                                                 |                                 |
  Manufacturing                |      144.2       145.0       145.5       145.3  |     .6      .6      .3     -.1  |             .6 
     Durable                   |      178.4       179.7       180.3       180.3  |     .7      .7      .3      .0  |             .8 
     Nondurable                |      111.0       111.4       111.7       111.5  |     .4      .4      .3     -.2  |             .4 
  Mining                       |       95.1        96.2        95.7        96.5  |    -.2     1.1     -.5      .8  |           -4.9 
  Utilities                    |      123.3       124.6       127.7       124.5  |    -.5     1.0     2.4    -2.5  |            2.8 
 -----------------------------------------------------------------------------------------------------------------------------------
                               |                                                                                   |    Capacity
                               |                                Percent of capacity                                |     growth
                               | --------------------------------------------------------------------------------- | ---------------
                               |     Average        1982     1988-89       2001  |   2002                          |    Aug. '01 to 
 Capacity utilization          |  1967-2001          Low        High       Aug.  |    May    June    July    Aug.  |      Aug. '02 
 -----------------------------------------------------------------------------------------------------------------------------------
                               |                                                 |                                 |
  Total industry               |       81.9        71.1        85.4        76.4  |   75.6    76.0    76.2    76.0  |            1.0 
     Previous estimates        |                                                 |   75.6    76.0    76.1          |                
                               |                                                 |                                 |
  Manufacturing                |       80.9        69.0        85.7        74.6  |   74.0    74.3    74.5    74.4  |             .9 
     Advanced processing       |       80.3        71.0        84.2        74.5  |   72.4    72.9    72.9    72.7  |             .6 
     Primary processing        |       82.0        65.7        88.3        74.8  |   76.4    76.6    77.0    77.0  |            1.5 
  Mining                       |       87.6        80.3        88.0        90.4  |   84.2    85.2    84.8    85.4  |             .6 
  Utilities                    |       87.6        75.9        92.6        87.7  |   86.3    86.9    88.8    86.3  |            4.5 
 -----------------------------------------------------------------------------------------------------------------------------------
 Note:  Estimates for August are preliminary.  Estimates from May to July are revised.

Market Groups

The output of consumer goods fell 0.5 percent in August as the result of broad declines in the production of both durable and nondurable goods. Consumer durables dropped 0.9 percent; the largest decrease in the sector was for miscellaneous consumer goods. Automotive products, which posted sizable gains in June and July, decreased 0.5 percent. Output also declined in the other major market groups within consumer durables--home electronics and appliances, furniture, and carpeting. Production of non-energy nondurables fell 0.2 percent; all major sectors posted declines except paper products, which has risen in each of the last four months. The output of consumer energy products, which includes electricity for residential use, dropped sharply after July's unseasonably warm weather.

The production of business equipment fell 0.4 percent in August. The primary contributor to the drop was a decline in motor vehicle assemblies, which in turn led to a decline of 3.1 percent in the transit equipment category. Despite increases in June and July, the August index for transit equipment was 13 percent below its year-ago level. The curtailment of commercial aircraft production over the past twelve months more than accounted for the decrease. The output of information processing equipment remained weak in August, while the production of industrial and other equipment reversed the decline in July. The output of defense and space equipment, which has increased more than 5 percent since August 2001, continued its upward trend. The output of construction supplies also rose in August after a sharp fall in July; the level of output of construction supplies in August was about even with its second-quarter average. The production of business supplies declined because the output of commercial energy products contracted.

The production of materials, which had increased in each of the previous seven months, fell 0.2 percent in August. The output of energy materials retreated from elevated July levels, while durable and nondurable materials were little changed on balance. Overall, the production of both durable and nondurable materials has risen 3.5 percent since August 2001.

Industry Groups

Manufacturing output edged down 0.1 percent in August after an upwardly revised gain in July; revisions were concentrated in nondurables, especially paper products and chemical products. Excluding motor vehicles and parts, manufacturing output was unchanged. Durable goods production was also unchanged. The production of motor vehicles and parts retreated a bit from the elevated pace in July, and furniture output declined, but production of primary metals--principally iron and steel--and industrial and electrical machinery rose noticeably. Since the fourth quarter of 2001, the output of semiconductors and related electronic components, a part of electrical machinery, has risen about 35 percent (annual rate). By comparison, semiconductor production fell 15 percent in 2001 and rose 42 percent in 2000.

The factory operating rate was 74.4 percent in August, a rate nearly 6.5 percentage points below its 1967-2001 average and only 1.0 percentage point above its level at the beginning of this year. The utilization rates for the primary-processing and for the advanced-processing industries were essentially unchanged. The utilization rate for the selected high-technology industries rose slightly as the utilization rate for semiconductor producers increased for a ninth month. The operating rate at mines also edged up, to 85.4 percent, but the rate at utilities fell to 86.3 percent.

Revision of Industrial Production and Capacity Utilization

On November 26, the Federal Reserve Board will publish a revision to the index of industrial production (IP), the related measures of capacity and capacity utilization, and the data on industrial use of electric power. The revised estimates will be classified according to the 2002 North American Industrial Classification System (NAICS); previously, the estimates from 1987 forward were classified according to the 1987 Standard Industrial Classification system (SIC). NAICS changes the SIC system's industry composition of manufacturing. To preserve the continuity of the production, capacity, and utilization rate measures featured in the Federal Reserve's G.17 statistical release, portions of SIC 27 (printing and publishing) and SIC 24 (lumber and products) that are not classified in manufacturing under NAICS will continue to be included in the overall IP index and capacity utilization.

The revised production indexes will be based on annual output measures that are constructed by reclassifying the establishments in historical Censuses of Manufactures and Mineral Industries under NAICS; annual output indexes constructed this way will maximize the reliability and historical consistency of the IP industry detail. Data going back to at least 1972 will be restated using NAICS. The monthly indicators used in current IP will be incorporated into the revised IP indexes as far back as the data will allow.

The updated measures will reflect the incorporation of newly available, more comprehensive source data typical of annual revisions. The updating of source data for IP in the 2002 annual revision will include annual data from the 2000 Annual Survey of Manufactures of the Bureau of the Census and from selected editions of its 2000 and 2001 Current Industrial Reports. Annual data from the U.S. Geological Survey regarding metallic and nonmetallic minerals (except fuels) for 2000 and 2001 will also be introduced. The updating will include revisions to the monthly indicator for each industry (either physical product data, production-worker hours, or electric power usage) and revisions to seasonal factors.

Capacity and capacity utilization will be revised to incorporate preliminary data from the 2001 Survey of Plant Capacity of the Bureau of the Census, which covers manufacturing, along with other new data on capacity from the U.S. Geological Survey, the Department of Energy, and other organizations. The statistics on the industrial use of electric power will incorporate additional information received from utilities for the past few years and will include some data from the 2000 Annual Survey of Manufactures.

Once the revision is published, it will be made available on the Board's web site, www.federalreserve.gov/releases/G17. The revised data will also be available through the web site of the Department of Commerce. Further information on these revisions is available from the Board's Industrial Output Section (telephone 202-452-3197).

Statistical releases

Last update: September 17, 2002, 9:15 AM