Industrial Production and Capacity Utilization - G.17

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Industrial production rose 0.8 percent in December after falling 0.7 percent in November. For the fourth quarter as a whole, the index slipped 0.6 percent at an annual rate. In December, manufacturing output moved up 0.2 percent and mining output was unchanged. The index for utilities jumped 6.6 percent, largely because of a return to more normal temperatures following unseasonably warm weather in November; the gain last month was the largest since December 1989. At 104.6 percent of its 2012 average, total industrial production in December was 0.5 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.6 percentage point in December to 75.5 percent, a rate that is 4.5 percentage points below its long-run (1972–2015) average.

Industrial Production and Capacity Utilization: Summary

Market Groups

In December, the jump in the output of utilities contributed substantially to gains in the indexes for consumer goods, business supplies, and materials through their energy components. Among the non-energy market groups, consumer durables posted an increase of 1.1 percent, with a gain in automotive products outweighing a decline in home electronics. The output of consumer non-energy nondurables was unchanged, as cutbacks in chemical products and paper products offset a gain in the index for foods and tobacco. An increase of 0.7 percent for business equipment was attributable to improvements both in information processing equipment and in industrial and other equipment; the index for transit equipment was unchanged. The output of defense and space equipment decreased 0.3 percent after advancing 1.5 percent in November. The indexes for construction supplies and non-energy business supplies moved down 0.3 percent and 0.4 percent, respectively, in December. The production of non-energy materials was unchanged, with a gain for durable materials offset by a loss for nondurable materials.

Industry Groups

Manufacturing output moved up 0.2 percent in December, as an increase in durable manufacturing outweighed declines in nondurable manufacturing and other manufacturing (publishing and logging). The index for manufacturing rose at an annual rate of 0.7 percent in the fourth quarter but was unchanged from its level in the fourth quarter of 2015. In December, the production of durables gained 0.5 percent. Primary metals recorded a sizable increase for a second consecutive month, and motor vehicles and parts registered a jump of 1.8 percent to nearly reverse its drop in November. Most nondurables industries posted declines in December; the biggest decreases were recorded by textile and product mills and by chemicals, at 3.0 percent and 1.0 percent, respectively.

The output of mining was unchanged in December. Gains posted in crude oil extraction and in oil and gas well drilling and servicing were offset by declines reported in other mining categories. After having fallen for six consecutive quarters, the index for mining advanced 3.4 percent at an annual rate in the third quarter and jumped nearly 12 percent in the fourth quarter.

Capacity utilization for manufacturing moved up 0.1 percentage point in December to 74.8 percent, a rate that is 3.7 percentage points below its long-run average. The operating rate for durables, at 76.2 percent, was 0.7 percentage point below its long-run average; the rates for nondurables and for other manufacturing (publishing and logging), at 74.2 percent and 60.6 percent, respectively, were substantially below their long-run averages. Utilization for mining increased 0.2 percentage point to 78.1 percent, and the rate for utilities jumped 4.8 percentage points to 79.1 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 on March 31, 2017. New annual benchmark data for 2015 for manufacturing will be incorporated, as will 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 2016 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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