Industrial Production and Capacity Utilization - G.17

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Industrial production declined 0.4 percent in December, primarily as a result of cutbacks for utilities and mining. The decrease for total industrial production in November was larger than previously reported, but upward revisions to earlier months left the level of the index in November only slightly below its initial estimate. For the fourth quarter as a whole, industrial production fell at an annual rate of 3.4 percent. Manufacturing output edged down in December. The index for utilities dropped 2.0 percent, as continued warmer-than-usual temperatures reduced demand for heating. Mining production decreased 0.8 percent in December for its fourth consecutive monthly decline. At 106.0 percent of its 2012 average, total industrial production in December was 1.8 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.4 percentage point in December to 76.5 percent, a rate that is 3.6 percentage points below its long-run (1972–2014) average.

Industrial Production and Capacity Utilization: Summary

Market Groups

In December, the drop in utilities output contributed substantially to declines in the indexes for consumer goods, business supplies, and materials. The indexes for the major components of those categories unrelated to utilities, however, were little changed or declined slightly: The indexes for consumer durables and consumer non-energy nondurables each declined 0.3 percent, while the indexes for general business supplies and non-energy materials were roughly unchanged. The production of business equipment edged up, as a gain in information processing equipment was mostly offset by decreases elsewhere. The indexes for defense and space equipment and for construction supplies each rose 0.6 percent.

Industry Groups

Manufacturing output slipped 0.1 percent in December and increased at an annual rate of 0.5 percent in the fourth quarter. Factory output in December was 0.8 percent above its year-earlier level. The output of durable goods moved up slightly in December. Among the categories of durables, the indexes for motor vehicles and parts and for primary metals each dropped more than 1.5 percent, while the indexes for electrical equipment, appliances, and components and for computer and electronic products each increased more than 1.5 percent. The output of nondurables declined 0.2 percent, led by a drop of 1.2 percent for petroleum and coal products and by a reduction of 0.8 percent for paper. These declines were partially offset by increases for plastics and rubber products and for textile and product mills. The output of other manufacturing industries (publishing and logging) fell 0.5 percent. The index for mining declined 0.8 percent because of a large drop in coal mining, while the index for utilities decreased 2.0 percent; both major categories recorded drops of more than 15 percent at an annual rate in the fourth quarter.

The capacity utilization rate for manufacturing was little changed in December at 76.0 percent, a rate 2.5 percentage points below its long-run average. The operating rate for durable goods industries held steady at 75.8 percent, roughly 1 percentage point below its long-run average. At 77.6 percent, the operating rate for nondurable goods industries was 2.8 percentage points below its long-run average. Utilization for other manufacturing industries (publishing and logging) was down 0.3 percentage point to 60.0 percent. The utilization rate for mining fell 0.8 percentage point to 78.4 percent, and the rate for utilities dropped 1.6 percentage points to 73.2 percent, the lowest rate in the history of the series, which began in 1972.

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 around the end of the first quarter of 2016. New annual benchmark data for 2014 for manufacturing will be incorporated, as well as other annual data, including information on the mining of metallic and nonmetallic minerals (except fuels). 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 2015 from the U.S. Census Bureau's Quarterly Survey of Plant Capacity 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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