Industrial Production and Capacity Utilization - G.17

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Industrial production rose 0.3 percent in December, its fifth consecutive monthly increase. For the fourth quarter as a whole, industrial production advanced at an annual rate of 6.8 percent, the largest quarterly increase since the second quarter of 2010; gains were widespread across industries. Following increases of 0.6 percent in each of the previous two months, factory output rose 0.4 percent in December and was 2.6 percent above its year-earlier level. The production of mines moved up 0.8 percent; the index has advanced 6.6 percent over the past 12 months. The output of utilities fell 1.4 percent after three consecutive monthly gains. At 101.8 percent of its 2007 average, total industrial production in December was 3.7 percent above its year-earlier level and 0.9 percent above its pre-recession peak in December 2007. Capacity utilization for total industry moved up 0.1 percentage point to 79.2 percent, a rate 1.0 percentage point below its long-run (1972–2012) average.

Industrial Production and Capacity Utilization: Summary

Market Groups

The production of consumer goods rose 0.5 percent in December, its fifth consecutive monthly increase, and was 3.6 percent higher than its level in December 2012. The index advanced at an annual rate of 8.8 percent in the fourth quarter of last year. Durable consumer goods output rose 1.1 percent in December, with substantial gains in the indexes for automotive products; home electronics; and appliances, furniture, and carpeting. For the fourth quarter, the output of durable consumer goods expanded at an annual rate of 14.7 percent, as the indexes for all of its major components increased briskly. The output of nondurable consumer goods moved up 0.3 percent in December: Gains for foods and tobacco, for clothing, and for paper products more than offset decreases for chemical products and for consumer energy products. For the fourth quarter, the index for non-energy consumer nondurables moved up at an annual rate of 2.7 percent while the index for consumer energy products jumped more than 20 percent.

The output of business equipment moved down 0.5 percent in December after having decreased 0.3 percent in November; declines for information processing equipment and for industrial and other equipment more than offset a gain for transit equipment. For the fourth quarter, the index for business equipment rose at an annual rate of 3.7 percent; all of its major components registered gains, but the advance of 8.5 percent for transit equipment was substantially larger than the increases for the other categories.

The index for defense and space equipment was unchanged in December, but it increased at an annual rate of 7.5 percent in the fourth quarter. Output in December was 2.2 percent above its level of a year earlier.

Among nonindustrial supplies, the production of construction supplies moved up 0.4 percent in December—its seventh consecutive monthly gain—and was 4.4 percent above its year-earlier level. For the fourth quarter, the index increased at an annual rate of 7.2 percent. The output of business supplies gained 0.3 percent in December—its sixth consecutive monthly gain—and increased at an annual rate of 5.4 percent in the fourth quarter.

The production of materials to be processed further in the industrial sector rose 0.4 percent in December following an increase of 1.4 percent in November. After having risen about 1 percent in each of the previous two months, the production of durable materials increased 0.2 percent in December; each of its major categories posted small gains. The output of nondurable materials rose 1.1 percent. Among its components, sizable gains for paper materials and for chemicals materials more than offset a decline in textile materials. The output of energy materials edged up. For the fourth quarter, the overall materials index advanced at an annual rate of 6.6 percent, with a gain of 9.4 percent for durable materials and smaller, but still substantial, gains for nondurable and energy materials.

Industry Groups

Manufacturing output moved up 0.4 percent in December, its fifth consecutive monthly increase, and rose at an annual rate of 6.2 percent in the fourth quarter. In December, the index remained 3.1 percent below its peak in December 2007. The factory operating rate in December was 77.2 percent, a rate 1.5 percentage points below its long-run average.

The production of durable goods edged up 0.1 percent in December. The largest gains—about 1 1/2 percent—were posted by primary metals; electrical equipment, appliances, and components; and motor vehicles and parts. The largest declines—around 2 percent—were recorded by wood products and by machinery. For the fourth quarter, the output of durable manufacturing moved up at an annual rate of 8.8 percent, as the indexes for all of its major categories increased. In December, capacity utilization for durable manufacturing was 77.4 percent, a rate 0.4 percentage point above its long-run average.

The output of nondurable goods increased 0.9 percent in December. All of its major categories except textile and product mills posted gains. For the fourth quarter, the index for nondurable manufacturing rose at an annual rate of 4.1 percent, with gains widespread among its major categories. The utilization rate for nondurable manufacturing jumped 0.6 percentage point to 78.3 percent in December, but it remained 2.4 percentage points below its long-run average.

Production in the non-NAICS manufacturing industries (logging and publishing) moved up 0.5 percent in December after having declined in the previous two months. Relative to its year-earlier level, output contracted 2.1 percent.

In December, production of mines advanced 0.8 percent, and capacity utilization moved up 0.3 percentage point to 90.2 percent, a rate 2.9 percentage points above its long-run average. The index for utilities dropped 1.4 percent, and the operating rate fell 1.2 percentage points to 80.1 percent, a rate 6.1 percentage points below its long-run average. For the fourth quarter, the output of utilities rose at an annual rate of 18.6 percent after having declined 6.4 percent in the third quarter.

Capacity utilization rates in December for industries grouped by stage of process were as follows: At the crude stage, utilization increased 0.3 percentage point to 88.7 percent, a rate 2.4 percentage points above its long-run average; at the primary and semifinished stages, utilization was unchanged at 77.9 percent, a rate 3.1 percentage points below its long-run average; and at the finished stage, utilization edged up 0.1 percentage point to 76.3 percent, a rate 0.8 percentage point 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 in late March 2014. New annual benchmark data for 2012 for manufacturing will not be available in time for this revision; however, the revised IP indexes will incorporate other annual data, including information from the U.S. Geological Survey on the mining of metallic and nonmetallic minerals (except fuels). The weights for market-group splits of the indexes will be updated with information from the 2007 benchmark input-output accounts from the Bureau of Economic Analysis. 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 2013 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 U.S. Department of Energy, and other organizations.

Once the revision is published, it will be available on the Board's website at www.federalreserve.gov/releases/G17.

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