Industrial Production and Capacity Utilization - G.17

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Industrial production was unchanged in March for a second month but rose at an annual rate of 5.4 percent in the first quarter of 2012. Manufacturing output declined 0.2 percent in March but jumped 10.4 percent at an annual rate in the first quarter. The gain in manufacturing output in the first quarter was broadly based: Even excluding motor vehicles and parts, which jumped at an annual rate of nearly 40 percent, manufacturing output moved up at an annual rate of 8.3 percent and output for all but a few major industries increased 5 percent or more. In March, production at mines rose 0.2 percent and the output of utilities gained 1.5 percent. For the quarter, however, the output of utilities dropped at an annual rate of 13.8 percent, largely as a result of unseasonably warm temperatures over the past several months, while the output of mining fell 5.4 percent. At 96.6 percent of its 2007 average, total industrial production for March was 3.8 percent above its year-earlier level. The rate of capacity utilization for total industry edged down to 78.6 percent, a rate 2.1 percentage points above its level from a year earlier but 1.7 percentage points below its long-run (1972--2011) average.

Industrial Production and Capacity Utilization: Summary

Market Groups

The production of consumer goods fell 0.2 percent in March; for the first quarter, output moved up at an annual rate of 2.4 percent. In March, the index for durable consumer goods decreased 0.5 percent, primarily as a result of declines in automotive products and in appliances, furniture, and carpeting. Even so, the output of durable consumer goods increased at an annual rate of 17.6 percent in the first quarter. The production of nondurable consumer goods decreased 0.2 percent in March; the output of non-energy nondurable consumer goods edged down 0.1 percent---all of its major components except miscellaneous consumer nondurables decreased---while the index for consumer energy products declined 0.3 percent.

The production of business equipment moved up 0.2 percent in March, its smallest gain since June 2011; from July 2011 through February 2012, this index had advanced more than 1 percent per month on average. In March, gains in transit equipment and in industrial and other equipment more than offset a pullback of 0.9 percent in the production of information processing equipment. In the first quarter, the output of business equipment advanced at an annual rate of 15.9 percent.

The index for defense and space equipment declined 0.7 percent in March after having gained 2.0 percent in February. This category posted an increase of 5.1 percent at an annual rate in the first quarter.

The production of construction supplies fell 1.3 percent in March after having advanced 1.9 percent in February. For the first quarter, construction supplies recorded an increase of 11.5 percent at an annual rate, its largest gain in nearly two years; nevertheless, production remained about 20 percent below its pre-recession level. The index for business supplies moved up 0.2 percent in March after being unchanged in February.

The output of materials to be further processed in the industrial sector rose 0.2 percent in March and increased at an annual rate of 5.1 percent in the first quarter. The index for durable materials was down 0.3 percent in March, its first decrease since April 2011: The output of consumer parts was unchanged and the production of equipment parts moved up 0.4 percent, but the index for other durable materials fell 0.9 percent. Consumer parts posted an increase of 34.7 percent in the first quarter, its largest advance since the second quarter of 2010. The production of nondurable materials edged up 0.1 percent in March; a gain in chemical materials was mostly offset by a loss in paper materials. The output index for energy materials rose 0.8 percent after three months of declines.

Industry Groups

Manufacturing output declined 0.2 percent in March but increased at an annual rate of 10.4 percent in the first quarter, the largest gain since the second quarter of 2010. Capacity utilization for manufacturing in March moved down 0.2 percentage point to 77.8 percent, a rate 14.0 percentage points above its trough in June 2009 but still 1.0 percentage point below its long-run average.

Within manufacturing, the output of durable goods declined 0.2 percent in March after having gained 1.2 percent in February. Among durables, the largest decreases in March were posted by nonmetallic mineral products, primary metals, and furniture and related products while moderate gains were recorded by wood products, machinery, motor vehicles and parts, and miscellaneous manufacturing. For the first quarter as a whole, durable goods manufacturing increased at an annual rate of 15.6 percent, with large gains for all of its major components.

The production of nondurable goods decreased 0.2 percent in March, but output increased at an annual rate of 5.7 percent in the first quarter, with increases for every major industry group. Among the major components of nondurables, only the indexes for textile and product mills and for chemical products moved up in March; the largest decreases were in apparel and leather, in printing and related support, and in petroleum and coal products.

Mining production edged up 0.2 percent in March after having dropped 4.0 percent in February. Capacity utilization in mining inched up to 87.5 percent in March and was 0.2 percentage point above its long-run average. The output of utilities increased 1.5 percent after having risen only 0.1 percent in February. The operating rate for utilities in March improved to 73.1 percent but still remained more than 4.5 percentage points below its average during 2011.

Capacity utilization rates in March at industries grouped by stage of process were as follows: At the crude stage, utilization increased 0.3 percentage point to 86.5 percent, a rate 0.2 percentage point above its long-run average; at the primary and semifinished stages, utilization was unchanged at 75.7 percent, a rate 5.4 percentage points below its long-run average; and at the finished stage, utilization slipped 0.3 percentage point, to 78.5 percent, a rate 1.3 percentage points above its long-run average.

Revision of Industrial Production and Capacity Utilization

The Federal Reserve Board issued its annual revision to the index of industrial production (IP) and the related measures of capacity utilization at noon EDT on March 30, 2012. The revised IP indexes incorporated detailed data from the 2010 Annual Survey of Manufactures, conducted by the U.S. Census Bureau. Annual data from the U.S. Geological Survey regarding metallic and nonmetallic minerals (except fuels) for 2010 were also incorporated. The update included revisions to the monthly indicator and to seasonal factors for each industry. In addition, the estimation methods for some series have changed. Modifications to the methods for estimating the output of an industry did affect the index from 1972 to the present.

Capacity and capacity utilization were revised to incorporate data through the fourth quarter of 2011 from the Census Bureau's Quarterly Survey of Plant Capacity, which covers manufacturing, along with new data on capacity from the U.S. Geological Survey, the Department of Energy, and other organizations.

The revision is available on the Board's website at www.federalreserve.gov/releases/G17. Further information on the revision can be obtained from the Board's Industrial Output Section (telephone number 202-452-3197).

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