Industrial Production and Capacity Utilization

Release Date: October 17, 2002
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INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION
[2002 Revision Notice Below]

Industrial production edged down 0.1 percent in September. Despite the declines in August and September, the index of industrial production was 140.5 percent of the 1992 average, a level still slightly above the June 2002 reading. Average production rose at an annual rate of 3.6 percent between the second and third quarters. Manufacturing output, which fell for the second consecutive month, dropped 0.3 percent in September, but the level of output was 2.5 percent above the December 2001 trough. Production at the nation's mines fell 1.1 percent in September, while the output of utilities rose 2.4 percent. Capacity utilization for total industry was 75.9 percent, a rate that is about the same as in June 2002. Both the capacity utilization rate and the change in overall industrial production were held down 0.1 percentage point by the effects of tropical storms on oil and gas extraction and petroleum refining around the Gulf of Mexico.

 INDUSTRIAL PRODUCTION AND CAPACITY UTILIZATION:  SUMMARY
 Seasonally adjusted
 -----------------------------------------------------------------------------------------------------------------------------------
                               |                    1992=100                     |                  Percent change
                               | ----------------------------------------------- | -------------------------------------------------
                               |       2002                                      |   2002                          |   Sept. '01 to 
 Industrial production         |       June        July        Aug.       Sept.  |   June    July    Aug.   Sept.  |     Sept. '02 
 -----------------------------------------------------------------------------------------------------------------------------------
                               |                                                 |                                 |
  Total index                  |      140.3       141.1       140.6       140.5  |     .6      .5     -.3     -.1  |            1.5 
     Previous estimates        |      140.3       140.9       140.5              |     .6      .4     -.3          |                
                               |                                                 |                                 |
  Major market groups:         |                                                 |                                 |
  Products, total              |      128.0       128.5       127.9       127.6  |     .6      .4     -.5     -.2  |             .0 
     Consumer goods            |      122.3       123.2       121.8       121.7  |     .8      .7    -1.1     -.1  |            1.5 
     Business equipment        |      163.8       163.9       164.0       161.2  |     .4      .1      .0    -1.7  |           -4.3 
     Construction supplies     |      140.5       138.3       139.6       140.0  |     .7    -1.5      .9      .3  |            1.4 
  Materials                    |      161.3       162.6       162.6       162.8  |     .7      .8      .0      .1  |            4.0 
                               |                                                 |                                 |
  Major industry groups:       |                                                 |                                 |
  Manufacturing                |      145.0       145.7       145.4       145.1  |     .6      .4     -.2     -.3  |            1.5 
     Durable                   |      179.7       180.4       180.8       180.0  |     .7      .4      .3     -.5  |            2.2 
     Nondurable                |      111.4       112.0       111.3       111.3  |     .4      .5     -.6      .0  |             .8 
  Mining                       |       96.0        95.7        96.3        95.3  |    1.0     -.3      .6    -1.1  |           -6.6 
  Utilities                    |      124.9       127.8       124.6       127.6  |    1.3     2.3    -2.5     2.4  |            8.0 
 -----------------------------------------------------------------------------------------------------------------------------------
                               |                                                                                   |    Capacity
                               |                                Percent of capacity                                |     growth
                               | --------------------------------------------------------------------------------- | ---------------
                               |     Average        1982     1988-89       2001  |   2002                          |   Sept. '01 to 
 Capacity utilization          |  1967-2001          Low        High      Sept.  |   June    July    Aug.   Sept.  |     Sept. '02 
 -----------------------------------------------------------------------------------------------------------------------------------
                               |                                                 |                                 |
  Total industry               |       81.9        71.1        85.4        75.5  |   76.0    76.3    76.0    75.9  |            1.0 
     Previous estimates        |                                                 |   76.0    76.2    76.0          |                
                               |                                                 |                                 |
  Manufacturing                |       80.9        69.0        85.7        73.7  |   74.3    74.6    74.4    74.2  |             .9 
     Advanced processing       |       80.3        71.0        84.2        73.3  |   72.8    73.1    72.7    72.3  |             .6 
     Primary processing        |       82.0        65.7        88.3        74.4  |   76.7    77.0    77.0    77.1  |            1.6 
  Mining                       |       87.6        80.3        88.0        90.9  |   85.1    84.8    85.3    84.4  |             .6 
  Utilities                    |       87.6        75.9        92.6        85.1  |   87.1    88.8    86.4    88.2  |            4.3 
 -----------------------------------------------------------------------------------------------------------------------------------
 Note:  Estimates for September are preliminary.  Estimates from June to August are revised.

Market Groups

A second month of broad declines in consumer durable goods helped push the output of consumer goods down 0.1 percent in September. The index for appliances, furniture, and carpeting fell for a fourth consecutive month to a level near its trough in 2001, and the production of miscellaneous consumer goods contracted for a second month. The output of automotive products eased in both August and September, but together with July's sharp increase, production for the third quarter was up at an annual rate of more than 23 percent. The production of non-energy nondurables was unchanged in September, with higher output levels of clothing and chemical products offset by declines elsewhere. A small decline in the output of paper products ended a four-month series of increases. The index for consumer energy products increased 1.0 percent in September; in recent months this measure has been influenced by large weather-driven swings in the output of electricity for residential use.

The production of business equipment dropped 1.7 percent in September. A key contributor to this decline was a pullback in the production of industrial and other equipment, especially construction and farm machinery. The index for transit equipment was drawn down again last month and has now contracted for five quarters. In September, reduced motor vehicle assemblies for businesses led the decline and were accompanied by the eighteenth consecutive monthly contraction in commercial aircraft production. The output of information processing equipment remained weak in September and was little changed from twelve months ago. The output of defense and space equipment, which has increased more than 7 percent since September 2001, continued its upward climb.

Although the output of construction supplies rose slightly in September, its average in the third quarter was little changed from the second quarter. The production of business supplies also rose slightly in September; most of the increase was attributable to commercial electricity sales. Materials output, which has risen 4.0 percent since September 2001, edged up for a ninth month. Greater output of energy and nondurable materials slightly more than offset a decline in the output of durable materials.

Industry Groups

Manufacturing output declined 0.3 percent in September; the production of durable goods was down, and the production of nondurable goods was unchanged. In the third quarter, manufacturing output rose at an annual rate of 3.3 percent after similarly sized increases in the first and second quarters. The production of durable and nondurable goods also increased in each of the last three quarters. Among durable goods, only the output of furniture and fixtures and aerospace and miscellaneous transportation equipment declined last quarter; both of these industries have been on downward trends for at least six quarters. In contrast, the production of motor vehicles and parts, primary and fabricated metals, and electrical machinery posted sizable gains. Among nondurable goods industries, the output of chemicals and products increased sharply in the third quarter. Production gains in the paper and products, printing and publishing, and rubber and plastics products industries more than offset output decreases in the food and tobacco products, apparel products, and petroleum products industries.

At 74.2 percent in September, the factory operating rate was 6.7 percentage points below its 1967-2001 average. This rate increased 1.7 percentage points between its December 2001 trough and July 2002, but it has fallen in each of the past two months. The utilization rate for primary-processing industries rose marginally in September to its highest level since February 2001, while the rate for advanced-processing industries posted a small decline. The operating rate at mines edged down to 84.4 percent, while the rate at utilities climbed to 88.2 percent.

Revision of Industrial Production and Capacity Utilization

On November 26, the Federal Reserve Board will publish a revision to the index of industrial production (IP), the related measures of capacity and capacity utilization, and the data on industrial use of electric power. The revised estimates will be classified according to the 2002 North American Industrial Classification System (NAICS); previously, the estimates from 1987 forward were classified according to the 1987 Standard Industrial Classification system (SIC). NAICS changes the SIC system's industry composition of manufacturing. To preserve the continuity of the production, capacity, and utilization rate measures featured in the Federal Reserve's G.17 statistical release, portions of SIC 27 (printing and publishing) and SIC 24 (lumber and products) that are not classified in manufacturing under NAICS will continue to be included in the overall IP index and capacity utilization.

The revised production indexes will be based on annual output measures that are constructed by reclassifying the establishments in historical Censuses of Manufactures and Mineral Industries under NAICS; annual output indexes constructed this way will maximize the reliability and historical consistency of the IP industry detail. Data going back to at least 1972 will be restated using NAICS. The monthly indicators used in current IP will be incorporated into the revised IP indexes as far back as the data will allow.

The updated measures will reflect the incorporation of newly available, more comprehensive source data typical of annual revisions. The updating of source data for IP in the 2002 annual revision will include annual data from the 2000 Annual Survey of Manufactures of the Bureau of the Census and from selected editions of its 2000 and 2001 Current Industrial Reports. Annual data from the U.S. Geological Survey regarding metallic and nonmetallic minerals (except fuels) for 2000 and 2001 will also be introduced. The updating will include revisions to the monthly indicator for each industry (either physical product data, production-worker hours, or electric power usage) and revisions to seasonal factors.

Capacity and capacity utilization will be revised to incorporate preliminary data from the 2001 Survey of Plant Capacity of the Bureau of the Census, which covers manufacturing, along with other new data on capacity from the U.S. Geological Survey, the Department of Energy, and other organizations. The statistics on the industrial use of electric power will incorporate additional information received from utilities for the past few years and will include some data from the 2000 Annual Survey of Manufactures.

Once the revision is published, it will be made available on the Board's web site, www.federalreserve.gov/releases/G17. The revised data will also be available through the web site of the Department of Commerce. Further information on these revisions is available from the Board's Industrial Output Section (telephone 202-452-3197).

Statistical releases

Last update: October 17, 2002, 9:15 AM