Industrial Production and Capacity Utilization - G.17

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Industrial production decreased 0.2 percent in May after falling 0.5 percent in April. The decline in April was larger than previously reported, but the rates of change for previous months were generally revised higher, leaving the level of the index in April slightly above its initial estimate. Manufacturing output decreased 0.2 percent in May and was little changed, on net, from its level in January. In May, the index for mining moved down 0.3 percent after declining more than 1 percent per month, on average, in the previous four months. The slower rate of decrease for mining output last month was due in part to a reduced pace of decline in the index for oil and gas well drilling and servicing. The output of utilities increased 0.2 percent in May. At 105.1 percent of its 2007 average, total industrial production in May was 1.4 percent above its year-earlier level. Capacity utilization for the industrial sector decreased 0.2 percentage point in May to 78.1 percent, a rate that is 2.0 percentage points below its long-run (1972–2014) average.

Industrial Production and Capacity Utilization: Summary

Market Groups

Among the major market groups, only business equipment and business supplies registered production gains in May, with increases of 0.2 percent and 0.1 percent, respectively. The production of consumer goods decreased 0.3 percent, as declines for both consumer energy products and non-energy nondurables outweighed a gain for durable consumer goods. The small advance for business equipment reflected increases in transit equipment and in information processing equipment. The output of defense and space equipment fell 1.3 percent. The output of construction supplies declined 0.3 percent, which partially reversed a gain in April. The index for materials decreased 0.1 percent in May. The output of nondurable materials fell 0.7 percent and the output of energy materials edged down, but these decreases were partially offset by a small improvement in the output of durable materials.

Industry Groups

Manufacturing output fell 0.2 percent in May, as a decrease of 0.7 percent in the output of nondurables was partially offset by a small increase in the production of durables. The largest gain among durable goods industries was recorded by motor vehicles and parts; its index increased 1.7 percent. Results for other durable goods industries were mixed, with none posting a gain or loss exceeding 0.7 percent. Almost all major nondurable goods industries registered declines, with the largest drop, 1.6 percent, occurring in the petroleum and coal products industry. The output index for other manufacturing industries (publishing and logging) moved up 0.6 percent. The decrease of 0.3 percent in mining resulted primarily from a drop in oil and gas well drilling and servicing, but it also reflected a decrease in nonmetallic mineral mining; an increase in crude oil extraction partially offset those declines.

The capacity utilization rate for manufacturing decreased 0.2 percentage point in May to 77.0 percent, a rate 1.6 percentage points below its long-run average. The operating rate for durable goods manufacturing remained steady at 76.5 percent, just a bit below its long-run average, while utilization for nondurable goods manufacturing decreased 0.6 percentage point to 79.1 percent, a rate 1.5 percentage points below its long-run average. The capacity utilization rate for other manufacturing (publishing and logging) increased to 57.8 percent, a rate more than 20 percentage points below its long-run average. Capacity utilization for mines fell 0.4 percentage point to 83.3 percent, while the operating rate for utilities increased 0.2 percentage point to 80.0 percent.

Revision of Industrial Production and Capacity Utilization

The Federal Reserve Board plans to issue its annual revision to the index of industrial production (IP) and the related measures of capacity utilization on July 21, 2015. The classification system for the industry groups will be advanced to the 2012 version of the North American Industry Classification System, and the comparison base year will be advanced to 2012. New annual benchmark data for 2012 and 2013 for manufacturing will be incorporated, as well as other annual data, including information on the mining of metallic and nonmetallic minerals (except fuels). The weights for market-group splits of the indexes will be updated with information from the 2007 benchmark input-output accounts from the Bureau of Economic Analysis. The updated IP indexes will include revisions to the monthly indicator (either product data or input data) and to seasonal factors for each industry. In addition, the estimation methods for some series may be changed. Any modifications to the methods for estimating the output of an industry will affect the index from 1972 to the present.

Capacity and capacity utilization will be revised to incorporate data through the fourth quarter of 2014 from the Census Bureau's Quarterly Survey of Plant Capacity, which covers manufacturing, along with new data on capacity from the U.S. Geological Survey, the U.S. Department of Energy, and other organizations.

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