Industrial Production and Capacity Utilization - G.17

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Industrial production decreased 0.6 percent in March after increasing 0.1 percent in February. For the first quarter of 2015 as a whole, industrial production declined at an annual rate of 1.0 percent, the first quarterly decrease since the second quarter of 2009. The decline last quarter resulted from a drop in oil and gas well drilling and servicing of more than 60 percent at an annual rate and from a decrease in manufacturing production of 1.2 percent. In March, manufacturing output moved up 0.1 percent for its first monthly gain since November; however, factory output in January is now estimated to have fallen 0.6 percent, about twice the size of the previously reported decline. The index for mining decreased 0.7 percent in March. The output of utilities fell 5.9 percent to largely reverse a similarly sized increase in February, which was related to unseasonably cold temperatures. At 105.2 percent of its 2007 average, total industrial production in March was 2.0 percent above its level of a year earlier. Capacity utilization for the industrial sector decreased 0.6 percentage point in March to 78.4 percent, a rate that is 1.7 percentage points below its long-run (1972–2014) average.

Industrial Production and Capacity Utilization: Summary

Market Groups

Business equipment was the only major market group to post a gain in production for March; its increase of 0.2 percent was mostly due to higher output of transit equipment. The index for consumer goods moved down 0.6 percent, with the decrease due to a drop of 5.0 percent in consumer energy products. The index for non-energy nondurable consumer goods moved up 0.2 percent. The output of durable consumer goods increased 1.7 percent, as a gain of 3.0 percent in automotive products outweighed declines in home electronics and in appliances, furniture, and carpeting. The index for materials fell 0.5 percent, with decreases in the output of both non-energy and energy materials.

Industry Groups

Manufacturing output for the first quarter of 2015 fell at an annual rate of 1.2 percent, its first appreciable decline since the second quarter of 2009. For March, manufacturing output edged up 0.1 percent. The production of durable goods moved up 0.2 percent, on the strength of a rebound in the production of motor vehicles and parts. The output of primary metals declined 3.2 percent to register the largest loss among durable goods industries. The production of nondurable goods moved up 0.1 percent; decreases in the indexes for paper, for chemicals, and for plastics and rubber products mostly offset gains by the other major nondurables industries. The production of other manufacturing industries (publishing and logging) fell 0.4 percent. The decrease of 0.7 percent for mining reflected a drop of 17 1/2 percent in the index for oil and gas well drilling and servicing that was partly offset by gains in crude oil and natural gas extraction and by a bounceback in coal mining.

The capacity utilization rate for manufacturing in March was unchanged from the previous month at 77.1 percent, a rate 1.5 percentage points below its long-run average. The operating rate for durable goods manufacturing edged down 0.1 percentage point to 76.6 percent, just below its long-run average. The operating rate for nondurable goods manufacturing remained constant at 79.4 percent, a rate 1.2 percentage points below its long-run average. Utilization for other manufacturing (publishing and logging) decreased 0.1 percentage point to 57.6 percent. Capacity utilization for mines dropped 1.0 percentage point to 84.4 percent, while the operating rate for utilities declined 5.1 percentage points to 80.0 percent.

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 mid-2015. New annual benchmark data for 2012 and 2013 for manufacturing will be incorporated, as well as other annual data, including information 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 2014 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.

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