US Industrial Production (M/M) Aug: 0.4% (Est 0.5%; Prev 0.9%); US Capacity Utilization Aug: 76.4% (Est 76.4%; Prev 76.1%) - Positive But Deceleration (In Part Due To Ida) - Details

US Industrial Production (M/M) Aug: 0.4% (est 0.5%; prev 0.9%) US Capacity Utilization Aug: 76.4% (est 76.4%; prev 76.1%) US Manufacturing (SIC) Production Aug: 0.2% (est 0.4%; prev 1.4%)

Although industrial production accounts for a relatively small portion of total gross domestic product, it is considered an important macroeconomic indicator as it measures output from the manufacturing, mining, electric and gas industries, and can aid in forecasting structural changes in the economy, business cycle inflection points and inflationary trends.

Following a strong July, August IP and capacity utilization remained positive with IP increasing 0.4% m/m (down from July's 0.8% (revised down from +0.9%)) as all major market groups other than mining increased for a second straight month led by increases in consumer goods (+0.8%). The result would have been better if not for Hurricane Ida which took -0.3% off the headline number according to the report due to forced plant closures for petrochemicals, plastic resins, and petroleum refining. Also June was revised up three tenths to +0.5% from last estimate of +0.2%. On a y/y basis IP now up 5.9%.

Other than materials (+0.1%) and mining (-0.6%) due to hurricane issues, all major market groups were up at least 0.4% again this month. Business equipment, which was up a huge 3.8% in July (revised up from 2.8%), added another 0.5% in August. That is great to see (business spending).

Utility output which was down -4.0% in July (revised down from -2.1%) due to cooler temperatures popped back by +3.3% in August.

Utilities are now up 2.8% y/y putting all major market groups in the green y/y. Full table of major market groups at the end along with a more granular one.

From the report:

Industrial production increased 0.4 percent in August after moving up 0.8 percent in July. Late-month shutdowns related to Hurricane Ida held down the gain in industrial production by an estimated 0.3 percentage point. Although the hurricane forced plant closures for petrochemicals, plastic resins, and petroleum refining overall manufacturing output rose 0.2 percent. Mining production fell 0.6 percent, reflecting hurricane-induced disruptions to oil and gas extraction in the Gulf of Mexico. The output of utilities increased 3.3 percent, as unseasonably warm temperatures boosted demand for air conditioning.

At 101.6 percent of its 2017 average, total industrial production in August was 5.9 percent above its year-earlier level and 0.3 percent above its pre-pandemic (February 2020) level. Capacity utilization for the industrial sector rose 0.2 percentage point in August to 76.4 percent, a rate that is 3.2 percentage points below its long-run (1972–2020) average.

Almost all major market groups posted increases in August, buoyed by strength in the output of utilities. Among consumer goods, the production of durables and non-energy nondurables increased modestly, while the index for consumer energy products moved up 2.5 percent. The output of business equipment, construction supplies, and business supplies posted gains of around 1/2 to 3/4 percent. The production of materials edged up, as an increase for energy materials offset a decrease for non-energy materials.

Manufacturing output - the largest component of industrial production and roughly 12% of GDP - increased 0.2 percent in August despite an estimated drag of 0.2 percentage point due to Hurricane Ida, and was 1.0 percent above its pre-pandemic level. The production of durable goods edged up in August; among its industries, the largest gain was recorded by furniture and related products and the largest loss was recorded by electrical equipment, appliances, and components. The output of nondurable goods also edged up, with gains for food, beverage, and tobacco products, for paper, and for petroleum and coal products outweighing losses elsewhere, in particular for chemicals. The output of other manufacturing (publishing and logging) rose 2.4 percent.

Turning to capacity utilization, it increased 0.1 percentage point in August to 76.7 percent. The operating rate for mining fell 0.4 percentage point to 76.1 percent, while the operating rate for utilities rose 2.3 percentage points to 75.6 percent. The rates for all three sectors remained below their long-run averages.

Summary

Details

Capacity Utilization.

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