Industrial Production and Capacity Utilization - G.17

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Industrial production decreased 0.6 percent in March for a second month in a row. For the first quarter as a whole, industrial production fell at an annual rate of 2.2 percent. A substantial portion of the overall decrease in March resulted from declines in the indexes for mining and utilities, which fell 2.9 percent and 1.2 percent, respectively; in addition, manufacturing output fell 0.3 percent. The sizable decrease in mining production continued the industry's recent downward trajectory; the index has fallen in each of the past seven months, at an average pace of 1.6 percent per month. At 103.4 percent of its 2012 average, total industrial production in March was 2.0 percent below its year-earlier level. Capacity utilization for the industrial sector decreased 0.5 percentage point in March to 74.8 percent, a rate that is 5.2 percentage points below its long-run (1972–2015) average.

Industrial Production and Capacity Utilization: Summary

Market Groups

Most major market groups recorded declines in March. The output of consumer goods decreased 0.4 percent: The indexes for durables and for consumer energy products each fell about 1 percent, while the output of non-energy nondurables edged down. Among durable goods, decreases for automotive products and for miscellaneous goods were slightly offset by gains for home electronics and for appliances, furniture, and carpeting. The decline for consumer energy products reflected the drop in utilities; however, the output of consumer fuels rose. The production of business equipment moved down 0.4 percent because of decreases in the indexes for transit equipment and for industrial and other equipment. The output of defense and space equipment moved up 0.4 percent. The indexes for construction supplies and business supplies declined 1.2 and 0.5 percent, respectively. The output of materials fell 0.8 percent, primarily as a result of a decrease for energy materials. For the first quarter, the output of consumer goods rose despite a drop in consumer energy products, but the indexes for most other major market groups decreased.

Industry Groups

Manufacturing output decreased 0.3 percent in March. The production of durables moved down 0.4 percent. The largest declines, about 1 1/2 percent, were registered both by motor vehicles and parts and by electrical equipment, appliances, and components. Several industries posted increases, with the largest, nearly 1 percent, for computer and electronic products. After increasing 0.9 percent in January and decreasing 0.5 percent in February, the output of nondurable manufacturing edged down in March, as gains in the production of petroleum and coal products and of chemicals nearly offset declines for most other industries. The output of other manufacturing (publishing and logging) fell almost 1 percent. For the first quarter, manufacturing output moved up at an annual rate of 0.6 percent, roughly reversing its small decrease in the fourth quarter of last year.

The drop of almost 3 percent in mining output in March was its largest monthly loss since September 2008, when production was curtailed because of hurricanes. The decline in March reflected substantial cutbacks in coal mining and in oil and gas well drilling and servicing, as well as decreases in oil and natural gas extraction. The index for mining has fallen nearly 13 percent over the past 12 months. The index for utilities moved down again, primarily because of a drop of 4.6 percent for natural gas utilities.

Capacity utilization for manufacturing fell 0.3 percentage point in March to 75.1 percent, a rate that is 3.4 percentage points below its long-run average. The operating rates for durables, nondurables, and other manufacturing (publishing and logging) each decreased. The operating rates for both mining and utilities dropped to 73.7 percent, the lowest rates over the histories of these series.[1]

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 April 1, 2016. New annual benchmark data for 2014 for manufacturing were incorporated, as well as other annual data, including information on the mining of metallic and nonmetallic minerals (except fuels). The updated IP indexes included revisions to monthly indicators (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 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.

[1] These measures are based on the North American Industry Classification System (NAICS) and start in 1972. Prior to 1972, industrial production and capacity utilization are computed from indexes based on the Standard Industrial Classification system instead of NAICS.
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