Industrial Production and Capacity Utilization - G.17

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Industrial production decreased 0.4 percent in August after increasing 0.9 percent in July. The increase in July is now estimated to be greater than originally reported last month, largely as a result of upward revisions for mining and utilities. Manufacturing output fell 0.5 percent in August primarily because of a large drop in motor vehicles and parts that reversed a substantial portion of its jump in July; production elsewhere in manufacturing was unchanged. The index for mining fell 0.6 percent in August, while the index for utilities rose 0.6 percent. At 107.1 percent of its 2012 average, total industrial production in August was 0.9 percent above its year-earlier level. Capacity utilization for the industrial sector fell 0.4 percentage point in August to 77.6 percent, a rate that is 2.5 percentage points below its long-run (1972–2014) average.

Industrial Production and Capacity Utilization: Summary

Market Groups

The drop in the output of motor vehicles and parts contributed significantly to decreases of between 0.3 and 0.6 percent in August in each of the indexes for consumer goods, business equipment, and materials. Aside from motor vehicles and parts, the output of consumer goods increased 0.4 percent, with gains in many of its components. Likewise, the output of business equipment other than motor vehicles and parts moved up 0.4 percent, as an increase of about 1 percent in the output of industrial and other equipment more than offset decreases for information processing equipment and for the portion of transit equipment not related to vehicles. The decrease in the index for materials reflected both the drop in motor vehicle parts as well as declines for most other materials, with every category except paper recording losses. Among other major market groups, the output of defense and space equipment fell 1.2 percent, the output of business supplies rose 0.3 percent, and the output of construction supplies edged up 0.1 percent.

Industry Groups

Manufacturing output fell 0.5 percent in August, as the production of durable goods fell 0.9 percent and the production of nondurable goods was unchanged. The output of durables other than motor vehicles and parts rose 0.1 percent, with gains of more than 1 percent for nonmetallic mineral products, machinery, and miscellaneous manufacturing and with losses of more than 1 percent for fabricated metal products and for aerospace and miscellaneous transportation equipment. Among the nondurable goods industries, the indexes for petroleum and coal products and for chemicals each fell about 1/2 percent, while the indexes for food, beverage, and tobacco products and for plastics and rubber products each rose about 1/2 percent. The production of other manufacturing (publishing and logging) edged down 0.2 percent.

The capacity utilization rate for manufacturing fell 0.4 percentage point in August to 75.8 percent, a rate 2.7 percentage points below its long-run average. The operating rate for durable goods industries, at 75.8 percent, was 1.1 percentage points below its long-run average, while the rate for nondurable goods, at 77.4 percent, was 3.0 percentage points below its long-run average. The capacity utilization rate for other manufacturing (publishing and logging) was unchanged at 57.8 percent. The utilization rate for mines fell 0.7 percentage point to 84.0 percent, while the rate for utilities increased 0.5 percentage point to 79.2 percent.

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 on July 21, 2015. The classification system for the industry groups was advanced to the 2012 version of the North American Industry Classification System, and the comparison base year was advanced to 2012. The revised indexes incorporated new annual benchmark data for 2012 and 2013 for manufacturing, as well as other annual data, including information on the mining of metallic and nonmetallic minerals (except fuels). The weights for market-group allocations of the indexes were updated with information from the 2007 benchmark input-output accounts from the Bureau of Economic Analysis. The updated IP indexes included 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 were changed. Modifications to the methods for estimating the output of an industry affected the index from 1972 to the present.

Capacity and capacity utilization were 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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