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Economy in Brief

U.S. Industrial Production Firms While Factory Sector Growth Is Stable
by Tom Moeller  December 15, 2010

U.S. industrial output growth recently has been hostage to variable weather influences. Growth in the factory alone, however, has been stable. For November, industrial production overall rose 0.4% and made up a 0.2% October decline, initially reported as unchanged. The ups and downs of these figures are due to first lower, then higher utility output. In the factory sector, growth was a stable 0.3%, though the October figure was revised down from last month's reading of 0.6%.

The capital goods sector continued to lead last month's growth in overall industrial output with a 0.9% jump, though it was off modestly from the upwardly revised 1.4% October jump. On a three-month basis, output of business equipment grew at an 11.9% rate though that remained down from the 22.5% peak this past May. In the consumer sector, output slipped for the fourth consecutive month. Three-month growth fell to -4.5% as lower auto (-18.4%) and apparel (-2.9%) output offset gains in computers, video & audio equipment (10.6%) and appliances (2.2%). Amongst all industries, 57.4% realized higher output versus last month and 60.9% versus three months ago.

Capacity utilization overall improved to 75.2% with the rise in production and remained well above last year's low of 68.2%. A 75.0% November rate had been expected. The factory sector utilization rate, alone, ticked up to 72.8%. The increase here is from the low of 65.4% during the recession. But the figures continue to paint a picture of abundant unused productive capacity. The latest rates compare to roughly 80% just before the recession and a fifty year average also of 80%.

Of note is that declines in capacity started just after the recession ended. Overall capacity has fallen 0.2% during the last twelve months and, excluding high-tech industries, factory capacity is down 0.8%. Industrial production and capacity data are included in Haver's USECON database, with additional detail in the IP database.

Industrial Production (SA, % Change) Nov Oct Sept Year Ago 2009 2008 2007
Total Output 0.4 -0.2 0.1 5.4 -9.3 -3.3 2.7
 Manufacturing 0.3 0.3 0.1 5.4 -11.1 -4.5 2.9
   Consumer Goods -0.5 -0.2 -0.4 2.3 -5.8 -4.2 0.9
   Business Equipment 0.9 1.4 0.5 12.5 -12.2 -1.5 4.5
   Construction Supplies 0.9 0.1 -0.5 6.0 -16.7 -9.5 -1.2
 Materials 0.7 -0.4 0.6 6.5 -9.7 -2.7 3.7
 Utilities 2.0 -3.7 -1.3 2.5 -2.6 -0.1 3.4
Capacity Utilization (%) 75.2 74.9 75.1 71.1 70.0 77.9 81.3
 Manufacturing 72.8 72.6 72.4 69.0 67.2 75.0 79.6
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