U.S. INDUSTRIAL PRODUCTION UP

U.S. FRB - September 15, 2020 - Industrial production rose 0.4 percent in August for its fourth consecutive monthly increase. However, even after the recent gains, the index in August was 7.3 percent below its pre-pandemic February level. Manufacturing output continued to improve in August, rising 1.0 percent, but the gains for most manufacturing industries have gradually slowed since June. Mining production fell 2.5 percent in August, as Tropical Storm Marco and Hurricane Laura caused sharp but temporary drops in oil and gas extraction and well drilling. The output of utilities moved down 0.4 percent. At 101.4 percent of its 2012 average, the level of total industrial production was 7.7 percent lower in August than it was a year earlier. Capacity utilization for the industrial sector increased 0.3 percentage point in August to 71.4 percent, a rate that is 8.4 percentage points below its long-run (1972–2019) average but 7.3 percentage points above its low in April.

Market Groups

Most major market groups posted increases in August, though generally by less than their average monthly gains over the previous two months. A decline in the index for consumer durables reflected a step-down in the output of automotive products, while a small decrease in the output of materials resulted primarily from a storm-induced drop in oil and gas extraction that held down energy materials. The indexes for all of the other major market groups advanced, with gains of between 1 percent and 2 percent recorded by business equipment, defense and space equipment, construction supplies, and business supplies.

Industry Groups

Manufacturing output increased 1.0 percent in August. After falling 20.3 percent between February and April, factory production has rebounded; even so, in August it was still 6.7 percent below its February level. The index for durable manufacturing rose 0.7 percent, as a decline in the output of motor vehicles and parts was more than offset by broad-based increases for other durable goods industries. The index for nondurables rose 1.2 percent, with gains of more than 3 percent for apparel and leather and for plastics and rubber products. The output of other manufacturing (publishing and logging) increased 1.9 percent.

The index for utilities moved down 0.4 percent in August, with small decreases for both electric and gas utilities. Mining output fell 2.5 percent as a result of the drops in oil and gas drilling and extraction; coal and other types of mining posted gains.

Capacity utilization for manufacturing was 70.2 percent in August, 10.3 percentage points higher than its trough in April but still 8.0 percentage points below its long-run average. The operating rates for durable and nondurable manufacturing increased to 69.4 percent and 72.4 percent, respectively. The rate for durables was 15.5 percentage points above its April low but still 5.5 percentage points below its pre-pandemic February level; the rate for nondurables has risen 5.1 percentage points since April but was still 4.0 percentage points below its February level. The operating rate for mining moved down to 74.5 percent in August, the second-lowest level in the history of the series after the 72.6 percent rate recorded in May of this year.

Revision of Industrial Production and Capacity Utilization

The Federal Reserve Board plans to issue its annual revision to the indexes of industrial production (IP) and the related measures of capacity utilization in the second half of 2020. New annual benchmark data for manufacturing for 2017 and 2018 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 industry-level indexes will be updated with information from the 2012 benchmark input-output accounts from the U.S. 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 for manufacturing through the fourth quarter of 2019 from the U.S. Census Bureau's Quarterly Survey of Plant Capacity Utilization, 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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