Industrial Production and Capacity Utilization: The 2001 Annual Revision
The Federal Reserve has revised the index of industrial production (IP) and the related
measures of capacity and capacity utilization for the January 1992 to October
fourth quarter to fourth quarter, industrial output and capacity are now
reported to have increased at a slower rate in 1999 and 2000 than previously
reported, but the revision still places the decline in IP in 2001 at about 51/2
percent at an annual rate. The estimated rate of increase in capacity
in 2001 was lowered by 0.7 percentage point, to 1.7 percent.
downward revision to IP in 1999 and 2000, the general contour is the same as in
the earlier estimates. After having
picked up in the second half of 1999 and after having posted rapid gains in the
first half of 2000, increases in industrial output abated noticeably at
mid-year. According to the revised
data, however, industrial output was weaker in the second half of 2000 than in
the earlier estimates.
The rate of
industrial capacity utilization (the ratio of production to capacity) as of the
third quarter of 2001 was little changed by the revision; at 76.2 percent, the
rate is 2-1/2 percentage points below the low of the 1990-91
recession but 4-1/2 percentage points above the low of the 1982 recession. For the fourth quarter of 2000, capacity
utilization was revised down 0.6 percentage point, to 80.7 percent; a downward
revision to the operating rate in manufacturing of 1.2 percentage points was
partly offset by an upward revision to the operating rates in mining and
measures reflect the incorporation of newly available, more comprehensive
source data and the introduction of improved methods for compiling a few
series. The new source data are for
recent years, primarily 1999 on, and the modified methods affect the indexes
from 1992 onward.
The statistical revisions to the IP
index were principally derived from the inclusion of information contained in
annual reports issued by the Bureau of the Census: the 1999 Annual Survey of
Manufactures and selected 2000 Current Industrial Reports. Revised annual data from the U.S. Geological
Survey (USGS) on minerals (except fuels) for 1999 and some new data for 2000
were also introduced. In addition, the
new monthly production estimates for 2000 and 2001 reflect updated seasonal
factors and the inclusion of monthly source data that became available (or were
revised) after the closing of the regular four-month reporting window.
indexes and capacity utilization rates incorporate the revised production
indexes, results from the Census Bureau’s 2000 Survey of Plant Capacity for the
fourth quarter of the year, and newly available 2000 data on industrial
capacity from the USGS, the Energy Information Agency (EIA) of the Department
of Energy, and other organizations. In
addition, the relationships used to estimate the current growth of
manufacturing capacity reflect the inclusion of the Census data on capital
spending by industry for 1999 and indicators of the rate of change in
manufacturing capital spending in 2000 and 2001.
indexes of industrial production and capacity also reflect the updating of the
value-added weights used in aggregating the individual indexes to the major
industry and market group subtotals and to total industry. The industry groups in IP and capacity
continue to be based on the 1987 Standard Industrial Classification (SIC); in
the 2002 revision, the industrial production and capacity utilization data will
be constructed and grouped according to the North American Industry
Classification System (NAICS).
with this revision, the capacity index for the extraction of natural gas is
based on newly available estimates from the EIA; the new data substantially
lower the estimate of the industry’s capacity for the 1995 to 1999 period. The revision also incorporates new source
data for another capacity series (silver); refinements to the methods used to
compile two monthly production series (construction machinery and original
equipment motor vehicle parts); and new methods and new source data to derive
the value-added weights for the IP and capacity series for electric
utilities. The rates of change in the
new weights were applied to the old 1992 weight to derive a new series of
annual weights (“bestchange” method) and result in slightly larger
value-added proportions for the electric utility industry.
Results of the Revision
For the third
quarter of 2001, the revision places the production index at 139.6 percent of
output in 1992 and the capacity index at 183.2 percent of output in 1992 (table
1); both indexes are lower than reported previously (chart 1). As noted earlier, the capacity utilization
rate was little changed for the third quarter of 2001.
2, 3, and 4 show new data for monthly manufacturing IP and capacity utilization
as well as the results for total and manufacturing excluding selected high-technology
industries. Tables 5 and 6 show the
revised rates of change of industrial production for market groups, industry
groups, special aggregates, and selected detail for the years 1997 through
2001:Q3; tables 7 and 8 show the revised figures for capacity utilization and
capacity. For production and capacity,
the tables also show the difference between the revised and earlier rates of
change. For capacity utilization, the
tables show difference between revised and previous rates for the final quarter
of the year (third quarter used for 2001).
lowered the increase in industrial output by 0.7 percentage point for 1999 and
1.6 percentage points for 2000 (measured from the fourth quarter of the
preceding year to the fourth quarter of the year indicated); the increase in industrial
production was raised slightly for 1997 and 1998.
faster increase in IP now shown for 1997 and 1998 reflect both the
incorporation of recently issued revisions to the annual Census data and the
introduction of refinements and revisions to the price deflators used to
construct the annual indexes that determine the trend in each industrial
production series from one year to the next.
For most two-digit
manufacturing industries, the new annual reports issued by the Census Bureau
implied only small changes to previously published IP figures for 1999. The output indexes for the transportation
equipment industry, the apparel and products industry, and the rubber and
plastics industry were revised.
However, new data for the computer industry, mainly for printers and
other peripheral equipment, implied a weaker gain in output for the industrial
machinery and equipment group. The
output of that industry was also lowered in 2000 because of the inclusion of
available data from the Current Industrial Reports. Nonetheless, on balance, the revised data still indicate that
the production of industrial machinery and equipment increased at a robust rate
in both years.
revision now places the rise in the production index for the output of high-technology
industries—computers and office equipment (SIC 357), semiconductors and related
devices (SIC 3672-9), and communications equipment (SIC 366)—at about 40
percent in 2000. The previously
published estimate was appreciably stronger; the new estimates show less rapid
gains in the output of semiconductors, computers, and peripherals. The downward revisions to the indexes for
semiconductor output reflect the incorporation of data from the 2000 Current Industrial
Report and more comprehensive information on prices.
high-technology industries, the revised IP series show more pronounced
weakness, mainly in manufacturing, in the second half of 2000. The change reflects the updating of seasonal
factors and the inclusion of revisions to monthly source data. The more pronounced weakness appears
in the durable goods manufacturing industries, especially the industrial
machinery, motor vehicle parts, instruments, furniture, and stone, clay, and
glass products industries.
Among major market
groups, the revised production indexes for consumer goods and for construction
supplies showed, on balance, little change for 2000 and 2001. The revised indexes for business equipment
and materials production showed slower gains in 2000 but little change in the
decline for 2001.
manufacturing capacity is estimated to be rising 1.6 percent, more than one
percentage point lower than previously published. On average, manufacturing capacity increased 4.6 percent per year
in 1999 and 2000 (previously estimated at about 5 percent) and, on average,
expanded 6 percent per year from 1994 to 1998 (virtually unchanged from the
previous estimates). The rapid gains in
capacity during the second half of the 1990s were concentrated in industries
producing high-technology goods and devices.
Given the downward revision to output in these industries, the pace of
capacity expansion was also revised down; nonetheless, from 1994 to 2000 it
still averaged nearly 40 percent per year.
The relatively slow expansion of capacity in these industries in 2001,
now estimated at 12.9 percent, is in large part the result of a downshift in
capital spending by semiconductor manufacturers. Outside of the selected high-technology industries, plant
capacity for 2001 is estimated to be edging up 0.3 percent, down from the 2
percent pace in 1999 and the 3.2 percent annual average for 1994 to 1998.
in mining was revised down noticeably for the 1995 to 2000 period, but was
revised up substantially for 2001. The
changes were primarily the result of incorporating new EIA measures for the
capability to extract natural gas; in value-added terms, natural gas extraction
is about 30 percent of mining output.
According to the revised data, from 1995 to 1998, capacity at mines
increased a scant 0.2 percent per year, and in 1999 and 2000 it declined about
2 percent per year. For 2001, however,
mining capacity is estimated to be increasing 0.4 percent.
at electric and gas utilities increased a bit more slowly from 1997 to 2000
than previously reported. The North
American Electric Reliability Council reduced its estimate of generating
capacity for 2000 but sharply increased the estimate for 2001; as a result, the
rise in capacity at utilities for 2001 was revised up more than one percentage
point, to 5.2 percent. In both the
previous and revised data, the rate of expansion of utility capacity for 2001
is the largest since 1974, a surge reflecting the response of producers to the
significant shortfall in generating capacity last winter.
The Survey of
Plant Capacity indicated that the factory operating rate was lower in the
fourth quarter of 2000 than previously estimated. The revised utilization rate for manufacturing is 79.1 percent in
the final quarter of 2000, more than 1 percentage point lower than reported
utilization in manufacturing reached 81.7 percent in the middle of 2000, 0.6
percentage point above its long-term (1967-2000) average. The factory operating rate had climbed to 83
percent in 1997, before the onset of economic turmoil in Asia, but dropped back
more than 2 percentage points by the end of 1998. From the middle of 2000 to the third quarter of 2001, the
utilization of manufacturing capacity plummeted more than 7 percentage points.
manufacturing industries in the third quarter of 2001, the utilization rates
for primary processors were nearly the same as those for advanced
processors. Since the middle of 2000,
the decline in the rate for primary processing industries—nearly 11 percentage
points—has been especially sharp.
Primary processors were operating at relatively elevated rates in the
second quarter of 2000; the rates for primary metals, semiconductors, stone,
clay and glass products, petroleum products, and motor vehicle parts were above
their long-term averages. By the third
quarter of 2001, the only primary processing industries that were operating at
rates above their long-term averages were petroleum and products and stone,
clay, and glass products. Among
advanced processors, only the producers of light trucks and of chemical
products were operating at above-average rates.
utilization in mining was an upwardly revised 90.8 percent in the third quarter
of 2001, more than 3 percentage points above its long-term average. The utilization rate for electric and gas
utilities in the third quarter of 2001 was little changed by the revision, but
the rates in 1998, 1999, and 2000 were raised.
Technical Aspects of the Revision
As noted earlier,
the annual revision incorporated more comprehensive annual data on industry
output, utilization, value added, and capital spending for 1999 and 2000, along
with an update of all seasonal factors and monthly data on production,
production worker hours, and electric power use. In addition, the capital input measures used in the construction
of capacity indexes incorporate more-recent overall business investment and
price data from the Bureau of Economic Analysis. Previously issued annual data on output and
prices for 1997 and 1998 that were slightly revised by the original source were
production and capacity utilization data continue to be based on the 1987
Standard Industrial Classification (SIC).
The Census Bureau reported its new 1999 and 2000 data on industry output
and capacity utilization, as well as its revisions to 1997 and 1998 data, on
the new North American Industrial Classification System (NAICS). Before being included in the IP and capacity
indexes, the data were recategorized by the Federal Reserve according to the
In the 2002
revision, the industrial production and capacity utilization data will be
derived according to the NAICS; data from at least 1977 onward will be subject
to revision; and the indexes will be rebased, with 1997 equal to 100. The new NAICS production data will be
derived from annual output measures constructed by reclassifying the
establishments in historical Censuses of Manufactures and Mineral Industries
according to NAICS categories; annual output indexes constructed in this way
maximize the reliability and historical consistency of the IP industry detail.
Revised Monthly Data
The product data
that are used to measure the monthly movements of many IP indexes were updated
to capture data that became available after the closing of the regular
four-month reporting window. For
example, monthly data from the Department of the Treasury on the production of
alcoholic beverages and cigarettes may be unavailable initially but available
for inclusion in the annual revision.
The input measures were also updated
to incorporate revised data on monthly production worker hours (based on the
BLS benchmark of employment to March 2000 comprehensive measures) and on
monthly electric power use since 1997.
Besides benchmarking data on production worker hour to March 2000
comprehensive measures, the BLS also incorporated data derived from new
sampling procedures from 1999 on. The
new estimates reduced the change in manufacturing production worker hours in
the second half of 2000, with the bulk of the reduction in industries in which
the data on production worker hours are used as the monthly production
indicator in IP.
Seasonal factors for all series were
re-estimated using data that extend into 2001. Factors for production worker hours, which adjust for timing,
holiday, and monthly seasonal patterns, were updated with data through October
2001. Factors for the electric power
series, which are developed using multivariate methods, were re-estimated using
data through May 2001. The updated
factors for the physical product series, which include adjustments for holiday
and workday patterns, used data through at least June 2001. Seasonal factors for unit motor vehicle
assemblies have been updated with data through September 2001 and are on the
Board’s website at www.federalreserve.gov/releases/g17/mvsf.htm.
Weights for aggregation
The weights for the aggregation of
IP indexes and capacity utilization rates are derived from annual estimates of
industry value added. For
manufacturing, the Census Bureau provides such data annually; for mining,
quinquennial figures are provided. For
the electric and gas utility industries, the Federal Reserve derives estimates
of value added from annual revenue and expense data issued by other
organizations. Estimates of industry
value added were updated with annual data through 1999, and the weights for aggregation
(unit value added) have been estimated using the most recent data on producer
prices. Table 9 reports the annual
value-added proportions incorporated in the IP index from 1993 on.
this revision, the methods and data used to obtain estimates of value added in
the electric utility industry have been improved. A change was necessary for several reasons. First, much of the data that had been used
to compute value added was contained in an EIA publication that has been
discontinued. Second, the EIA data on
“utilities” include regulated entities only, and data covering all producers of
electric power (that is, including the unregulated power generators) are
required to avoid a severe understatement of the value added by the entire
industry in 2000. Last, a review of the
earlier methods suggested value added was understated for the period preceding
the deregulation of the industry.
Reserve’s new estimates of value added for the electric utility industry were
constructed according to the Census definition of value added, that is,
industry revenue less the cost of purchased material inputs. Data on industry revenue (including all
establishments that distribute power to final users) were obtained from
Statistical Yearbooks issued by the Edison Electric Institute; these data were
combined with EIA measures of fuel costs to obtain an estimate of Census value
added. The new figures were applied on
a best-change basis for the period from 1992 onward; the 2002 revision will
introduce refined results as well as revised figures for earlier years.
Changes to individual series
this revision, the capacity series for natural gas extraction (part of SIC 13)
incorporates new estimates developed by the EIA; the new estimates are
substantially lower than the agency’s previous figures that were used to derive
the capacity for natural gas extraction.
The new figures are designed to better reflect the ability of producing
wells to deliver gas into the gathering and pipeline system, whereas previous
EIA figures measured capacity at the wellhead only.
source data for one other capacity series has changed. The index for silver capacity is now based
on data from the USGS; previously it was derived using a trend-through-peak
monthly production indicators for construction machinery and original equipment
motor vehicle parts were refined. For
construction machinery, the weights used to combine the available product data
were updated. For motor vehicle parts,
the indicator is developed from monthly product data (engines, brakes, axles,
and transmissions), production worker hours, and motor vehicle assemblies;
previously, the series was derived from the product data only.
the annual estimates of motor vehicle repair parts were improved; their
derivation now includes information on the average age of the motor vehicle
The 2000 revision introduced a new
IP series for the production of local area network (LAN) equipment (routers,
switches, and hubs). The new series is
not published in the monthly statistical release, but it is included in the
broader IP aggregate for communications equipment and updated on an ongoing
basis (see the March 2001 Bulletin
article). The table below updates the
results for LAN equipment originally issued a year ago.
U.S. LAN Equipment, 1992 to 2001
||Value of Production
||Millions of dollars
Indexes are 1992=100
Indexes are 1996:Q1=100
G.17 Revision Release Tables:
| Chart ||Industrial production, capacity, and utilization |
| Ascii || Screen reader || Table 1:Industrial Production, Capacity and Utilization: Total Industry |
| Ascii || Screen reader || Table 2:Industrial Production, Capacity and Utilization: Manufacturing |
| Ascii || Screen reader || Table 3: Total Industry excluding Selected High-Technology Industries |
| Ascii || Screen reader || Table 4: Manufacturing excluding Selected High-Technology Industries |
| Ascii || Screen reader || Table 5: Rates of Change in Industrial Production, by Major Market Groups |
| Ascii || Screen reader || Table 6: Rates of Change in Industrial Production, by Industry Groups |
| Ascii || Screen reader || Table 7: Revised Earlier Capacity Utilization Rates, by Industry Groups |
| Ascii || Screen reader || Table 8: Rates of Change in Capacity, by Industry Groups |
| Ascii || Screen reader || Table 9: Annual Proportions in Industrial Production, by Industry Groups |
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Last update: November 27, 2001 11:00 AM