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Economy in Brief

U.S. Industrial Production Unexpectedly Declines in August
by Winnie Tapasanun  September 15, 2022

• IP -0.2% in August, +0.5% in July (revised down from +0.6%), 0.0% in June.

• Manufacturing IP (only +0.1% in August; downwardly revised for July and June) increases for the second consecutive month after two straight m/m drops, w/ durable goods virtually unchanged and nondurable goods up 0.2%.

• Motor vehicle output decreases 1.4%, the third m/m drop in four months, after a downwardly revised 3.2% July increase.

• Utilities output falls for the second successive month while mining activity holds steady.

• Consumer goods output declines for the third time in four months while business equipment rises for the second consecutive month.

• Capacity utilization eases 0.2%-pt. to 80.0%; mfg. capacity utilization unchanged at 79.6%.

Total industrial production fell 0.2% m/m (+3.7% y/y) in August after rising 0.5% in July (+0.6% initially) and holding steady in June, according to the Federal Reserve Board. The August IP index at 104.5 was 2.8% above its pre-COVID (February 2020) level. A 0.2% m/m increase had been expected in the Action Economics Forecast Survey.

In industry groups, manufacturing production edged up 0.1% (3.3% y/y) in August after a 0.6% increase in July (+0.7% initially) and a 0.5% decline in June (-0.4% previously). Durable goods ticked up 0.01% (4.3% y/y) after a 0.9% July gain, reflecting output rises of 2.1% (8.6% y/y) in aerospace & miscellaneous transportation equipment, 1.7% (7.9% y/y) in miscellaneous durables goods, 1.3% (0.6% y/y) in computer & electronic products, and 1.0% (3.1% y/y) in machinery. However, production for motor vehicles & parts (-1.4%; +10.2% y/y), electrical equipment & appliances (-1.0%; +2.8% y/y), fabricated metal products (-0.9%; +3.6% y/y), and primary metals (-0.4%; -0.7% y/y) posted their m/m drops in August. Production for furniture & related products fell for the sixth consecutive month in August (-2.1%; -0.5% y/y); production for wood products fell for the fourth time in five months (-1.7%; +0.8% y/y). Nondurable goods rose 0.2% (2.3% y/y) after a 0.3% July rebound, led by output gains of 3.5% (2.2% y/y) in petroleum & coal products, 0.8% (0.6% y/y) in paper, and 0.3% (3.0% y/y) in chemicals but partly offset by output drops of 1.2% (-3.3% y/y) in textiles & product mills, 0.9% (+1.4% y/y) in food, beverages & tobacco, and 0.5% (+4.2% y/y) in apparel & leather goods. Utilities output fell 2.3% (-1.6% y/y) in August after a 1.2% July decline and three straight monthly gains. Mining activity was unchanged m/m (+8.4% y/y) in August following five successive monthly rises.

In market groups, consumer goods output eased 0.2% (+2.2% y/y) in August, the third m/m decline in four months, after a 0.3% increase in July. Construction supplies dropped 0.6% (+3.6% y/y) following July’s 0.8% rebound. Materials production fell 0.4% (+3.6% y/y) vs. six consecutive m/m advances. In contrast, business equipment grew 0.7% (5.8% y/y) following a 0.5% July rise and two straight m/m declines.

In the special classifications, factory output of selected high-tech industries rose 0.3% (5.8% y/y) in August, the sixth m/m rise in seven months, on top of a 0.5% gain in July. Manufacturing production excluding selected high-tech industries inched up 0.1% (3.2% y/y) after a 0.6% July increase and two successive monthly drops. Manufacturing production excluding both selected high-tech and motor vehicles & parts increased 0.2% (2.7% y/y) after a 0.4% July gain and two consecutive monthly decreases.

Capacity utilization declined to 80.0% in August from 80.2% in July; still 0.4 percentage point above its long-run (1972–2021) average. An 80.3% rate had been expected. Manufacturing capacity utilization held steady at 79.6%; 1.4 percentage points above its long-run average.

Industrial production and capacity are located in Haver's USECON database. Additional detail on production and capacity utilization can be found in the IP database. The expectations figures come from the AS1REPNA database.

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