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Economy in Brief

Return to Somewhat More Seasonal Weather Boosts Industrial Production in February
by Gerald D. Cohen  March 17, 2020

• Industrial production increased 0.6% in February driven by a 7.1% jump in utility output.

• Factory production edged up 0.1% as gains in motor vehicle production offset continued declines in aerospace.

• Capacity utilization in the manufacturing sector unchanged at 75.0%, well below January 2018 cycle peak of 77.3%.

Industrial production grew 0.6% in February (unchanged year-on-year) following a downwardly-revised 0.5% decline January (was -0.3%). The Action Economics Survey forecast a 0.4% gain in February.

Manufacturing activity edged up 0.1% (-0.4% y/y) during February, with a slight downward revision to January (now -0.2% versus -0.1%). Utilities output jumped 7.1% (0.4% y/y), as a return to somewhat more seasonal weather in February increased demand. U.S. population-weighted heating was 66 degree-days below normal in February versus 176 in January and 101 in December. Meanwhile mining activity fell 1.5% (+2.1% y/y).

Manufacturing of durable goods gained 0.3% (-0.4% y/y) in February, with aircraft production down another 3.6% (-12.5% y/y) as a result of the 737 MAX production halt. Motor vehicle output grew 3.5% (1.4% y/y) while machinery output declined 1.0% (-3.5% y/y). Nondurable output ticked down 0.1% (+0.1% y/y).

Output of business equipment, an indicator of capital spending, decreased 0.4% in February, the third consecutive monthly decline (-3.7% y/y). In the special aggregate groupings, production of high technology products was down 0.2% (+7.0% y/y), perhaps weighted down by supply chain challenges emanating from Chinese corona-related shutdowns. However, this sector is less than 2% of total output. Factory output excluding the motor vehicle, high tech, and energy sectors decreased 0.2% (-0.8% y/y), and remains 11% below its 2007 peak.

Capacity utilization rose to 77.0%. The Action Economics Survey expected 77.1%. Factory sector use was unchanged at 75.0% as January's reading was revised slightly lower (was 75.1%). Factory usage is down 2.3 percentage points from January 2018's cyclical peak. Utility usage rebounded to 75.8% from January's record low of 71.0%. (data began in 1967). Capacity in the manufacturing sector grew 1.3% y/y, the third month it has surpassed its 2008 peak.

Industrial production and capacity data and US Population-Weighted Heating and Cooling Days are included in Haver's USECON database. Additional detail on production and capacity can be found in the IP database. The expectations figures come from the AS1REPNA database.

Industrial Production (SA, % Change) Feb Jan Dec Feb Y/Y 2019 2018 2017
Total Output 0.6 -0.5 -0.4 0.0 0.9 3.9 2.3
Manufacturing 0.1 -0.2 0.1 -0.4 -0.2 2.3 2.0
   Durable Goods 0.3 -0.8 -0.3 -0.4 0.7 3.4 2.2
     Motor Vehicles 3.5 1.3 -4.6 1.4 -2.4 4.1 0.0
     Selected High Tech -0.2 0.6 1.0 7.0 5.1 6.4 2.6
   Nondurable Goods -0.1 0.4 0.6 0.1 -0.7 1.9 1.9
Utilities 7.1 -4.9 -5.7 0.4 -0.8 4.4 -0.8
Mining -1.5 1.0 0.8 2.1 7.1 12.4 7.4
Capacity Utilization (%) 77.0 76.6 77.1 78.5 77.8 78.7 76.5
   Manufacturing 75.0 75.0 75.2 76.3 75.6 76.6 75.1
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