Industrial Production and Capacity Utilization: The 2024 Annual Revision PDF  ASCII RSS DDP

Release Date: June 28, 2024

The Federal Reserve has revised its index of industrial production (IP) and the related measures of capacity and capacity utilization.[1] On net, growth rates for total IP were little changed in recent years, with most years unchanged; the rates of change for 2020 and 2023 were revised up by 0.1 percentage point and down by 0.1 percentage point, respectively.[2] Similarly, the utilization rates for total industry are little changed from previous estimates.

Because revisions to the index of IP were minimal, the overall picture of performance in the industrial sector since the COVID-19 pandemic is unchanged. After contracting sharply in the first half of 2020 because of the pandemic, the industrial sector rebounded later in the year and in 2021, and it exhibited more modest growth in 2022. Output growth slowed further in 2023, with production roughly flat since 2022.

In the fourth quarter of 2023, capacity utilization for total industry stood at 78.3 percent, 1/2 percentage point below its previous estimate and about 1-1/2 percentage points below its long-run (1972–2023) average. Most of the small downward revision to utilization reflects modest upward revisions to estimates of capacity. The utilization rates for 2018 to 2022 are close to previous estimates—within 0.3 percentage point—and revisions to earlier years are negligible.

Annual capacity growth for the industrial sector is revised up by 0.8 percentage point in 2023; earlier year revisions are very small. Capacity for total industry at the end of 2023 is now estimated to be 1-1/2 percent higher than at the end of 2018; previously, it was estimated to have increased about 1/2 percent over this period.

This revision incorporated newly available annual data on output for logging and mining industries as well as annual data on shipments for publishing industries. The nominal data used in the benchmark indexes for manufacturing industries—the Census Bureau's Census of Manufactures—are not yet available for 2022. Within mining, the indexes for metallic and nonmetallic minerals were updated with revised annual data for 2021 and with new data for 2022 from the U.S. Geological Survey (USGS). For publishing, the IP indexes folded in data for 2022 from the Census Bureau's Service Annual Survey. The index for logging was updated to include data from 2021 and 2022 from the U.S. Forest Service.

With no new benchmark data for manufacturing, the annual rates of change for IP are very similar to the estimates published previously. The monthly pattern of production, however, has been updated to include late-arriving or revised quarterly or monthly indicator data, including information from the Bureau of Labor Statistics' (BLS) benchmark revisions to the Current Employment Statistics. The IP estimates also reflect updated seasonal factors.

The revised estimates of capacity and capacity utilization incorporated data from the Census Bureau's Quarterly Survey of Plant Capacity Utilization for the fourth quarters of 2022 and 2023 along with new data on capacity from the USGS, the Energy Information Administration, and other organizations.

RESULTS OF THE REVISION

Industrial Production

Manufacturing output moved up about 3-1/2 percent in 2021 and another 1/2 percent in 2022 before moving down approximately 1/2 percent in 2023. The strong recovery in manufacturing output following the onset of the pandemic moderated in 2022 before retreating somewhat in 2023, as previously reported, though output remains above its pre-pandemic level.

The revised contour for mining output shows a strong rebound in 2021 following the sharp, pandemic-induced decline in 2020 and further, more moderate gains in 2022 and 2023. The growth rate in 2022 is almost 1/2 percentage point stronger than previously reported, while the gain in 2023 is about 1/4 percentage point weaker. The rates of change for utilities output are little changed from their previously reported values.

Production by Industry Group

The output of durables follows roughly the same contour as overall manufacturing. Output grew strongly in 2021 and then gradually moderated over the course of 2022 and 2023. Relative to the previous estimates, the reported rates of change in 2021, 2022, and 2023 are about 1/4 percentage point weaker on average. Among durable goods manufacturing industries, revisions to most growth rates were modest. The largest single-year revision among durables came in the index for nonmetallic mineral products, which revised downward by 2-1/2 percentage points for 2022. Elsewhere in durable goods manufacturing, the indexes for computer and electronic products and for electrical equipment, appliances, and components revised up by about 2 percentage points in 2022 and revised down by more than 1-1/2 percentage points in 2023.

The index for nondurables was also little changed after the revision. Among nondurable manufacturing industries, the revisions to the rates of change were mixed, with the indexes for textiles and product mills, apparel and leather goods, and paper revising downward, on net, and the index for plastics and rubber products revising upward.

The output index for industries in scope for manufacturing IP that are not part of manufacturing under the North American Industry Classification System (NAICS)—that is, logging and publishing—continued its long-running trend of decline. The declines in 2021 and 2022 are reported to have been smaller than previously published, while the decrease in 2023 is larger.

Production by Market Group

Output of consumer goods was also little revised from previously reported values. Within consumer goods, a downward revision to the index for computers, video, and audio equipment in 2022 was more than offset by an upward revision in 2023. The rate of change for business equipment revised up by about 1/2 percentage point in 2021 and revised down by about 3/4 percentage point in both 2022 and 2023; smaller revisions to the index were reported for earlier years. Relative to earlier reports, the index for transit equipment now recorded noticeably slower growth in 2022 and 2023, although growth for 2021 revised upward. The index for defense and space equipment revised down for both 2021 and 2023 due in part to a reassessment of annual deliveries based on manufacturer reports and Aviation Week magazine.

Revisions to the index for construction supplies were minor, with output somewhat weaker than previously reported for 2022. Growth in the index for business supplies revised up for 2022 by more than 1 percentage point but revised modestly downward for 2023. The output of materials was little changed cumulatively from previously reported values.

Capacity Utilization

Capacity utilization for total industry moved down in 2019 and 2020 before jumping up to around 80 percent in 2021 and 2022 and then moving down modestly in 2023; the reading in May 2024 was 78.2 percent, about 1.5 percentage point below its 1972–2023 average. Previous estimates displayed a similar contour, with the main difference being that utilization now declines somewhat more in 2023 than previously estimated. The downward revision to utilization for total industry in 2023 is due primarily to considerably lower operating rates at mines than in previous estimates.

In manufacturing, capacity utilization moved up about 3-1/4 percentage points in 2021, remained flat in 2022, and moved down 1-1/4 percentage points in 2023. The factory operating rate in May 2024 was 77.3 percent, 1 percentage point below its long-run average. The current readings for manufacturing utilization are modestly higher than the previous estimates for 2020 to 2023. Revisions to utilization rates for 2023 were mixed among manufacturing industries and largely offsetting. The largest upward revisions in operating rates occurred in computer and electronic products, in food, and in electrical equipment, appliances, and components. The largest downward revisions in operating rates occurred in apparel, wood products, and chemicals.

The capacity utilization rate for mining decreased about 19 percentage points from 2018 to 2020 before rebounding in 2021 and 2022 to 90.2 percent, roughly back to its 2018 level and about 4 percentage points above its long-run average. Relative to its previously published rate, utilization at mines for the fourth quarter of 2023 is about 4-1/2 percentage points lower. The operating rate for utilities declined about 6 percentage points from 2018 to 2020, was roughly flat in 2021 and 2022, and then moved down in 2023 to 72 percent, about 12 percentage points below its long-run average.

Capacity

Total industrial capacity declined in 2020 and 2021; it then rose by 1 percent in 2022 and 2.3 percent in 2023. Overall capacity is expected to rise 1.2 percent in 2024. Compared with previous estimates, overall capacity growth is roughly unchanged prior to 2023; the increase in 2023 is now about 3/4 percentage point larger.

Manufacturing capacity is now reported to have contracted 1/2 percent per year, on average, from 2018 to 2021. Capacity at manufacturers expanded 0.4 percent in 2022 and 1.2 percent in 2023, modestly less than previous estimates. The small downward revisions to manufacturing capacity growth during this period were mostly among durable manufacturing industries. Manufacturing capacity is expected to grow by 1.3 percent in 2024.

Mining capacity rose in 2018 and 2019 before falling back by an equivalent amount in 2020 and 2021. Mining capacity moved up in both 2022 and 2023 by about 3.5 percent per year; these gains in capacity are somewhat stronger than our previous estimates. Mining capacity is expected to decline by 0.8 percent in 2024. Capacity for electric and gas utilities rose at a steady pace of 1-1/2 percent per year, on average, from 2018 to 2022 before stepping up to a growth rate of 3-1/2 percent in 2023. Capacity at utilities is expected to continue to rise at this faster rate in 2024. Revisions to the rates of capacity growth of utilities were, on net, very small.

TECHNICAL ASPECTS OF THE REVISION

The IP indexes represent the level of real output relative to a base year. At the monthly frequency, movements of the indexes are based on indicators that are derived using industry-specific data from a variety of government and private sources. The monthly production indexes are anchored to annual benchmarks that are less timely but typically based on more comprehensive data. In most cases, the annual benchmark is nominal gross output reported by the Census Bureau deflated by a suitable price index.

Annual revisions to the IP and capacity measures generally involve (1) incorporating new and revised annual benchmark data on output, prices, and value-added proportions; (2) incorporating new monthly or quarterly data that were revised or that arrived too late to be included in the regular six-month reporting window for monthly IP; (3) updating seasonal adjustment factors; (4) updating the methods used to construct the indexes; and (5) introducing changes to the industry- or market-group structure of the indexes based on changes to underlying data sources.

Annual Benchmark Data on Output, Prices, and Value-Added Proportions

Output

The annual benchmark output indexes for IP are measures of real gross output at the six-digit NAICS (2017) level. The Census Bureau provides annual figures for value-added and the cost of materials for manufacturing industries, which can be summed to obtain nominal gross output. The Census Bureau has not yet published the 2022 Census of Manufactures, so new nominal benchmark data are not available for manufacturing. The benchmark indexes for metallic and nonmetallic mineral mining were updated with any newly available data from 2021 through 2023 from the USGS, the benchmark index for publishing was advanced through 2022 based on data from the U.S. Census Bureau, and the benchmark index for logging includes new data from the U.S. Forest Service for 2021 and 2022.

Prices

Individual benchmarks of real gross output are obtained by deflating the measures of nominal gross output by annual price deflators. In general, the benchmark industry price deflators consist of price indexes from the Bureau of Economic Analysis (BEA) through 2011 that are extended through 2022 with the related producer price indexes (PPIs) from the BLS.[3] However, for a few selected industries, the annual price deflators are constructed by the Federal Reserve.[4]

Value-Added Proportions (Weights for Aggregation)

The IP system is organized as a hierarchical structure where individual production indexes are combined using a version of the Fisher ideal index formula to construct aggregate indexes of production. Utilization rate aggregates are calculated on an annual basis through the most recent year as capacity-weighted aggregates of individual utilization rates.

The weights that are used to combine individual IP indexes into more aggregate indexes are based on the value-added from the industry, calculated as gross output less cost of materials. For individual IP indexes that are defined at the six-digit (or more aggregate) NAICS level, the value-added weights are derived from either the Economic Census or the Annual Survey of Manufacturers (ASM). For IP indexes that cover only part of a six-digit NAICS industry, the aggregation weights were constructed by allocating value-added (as defined by the Census Bureau) for a six-digit industry across the various components of IP that compose that industry.

The allocation of value-added across each component was determined by that component's share of the industry's overall product shipments. As in the 2023 annual revision, this annual revision used data on product shipments based on the new 2017 North American Product Classification System (NAPCS). Because the 2022 Economic Census has not been published, we utilize data on product shipments through 2021. In earlier revisions, product shipments were classified based on NAICS and were included as part of the Census of Manufactures or the ASM. NAPCS is coded independently of NAICS, and a concordance was required to align the recent data with the historical data for the period before 2017. Missing values for specific NAPCS-based products were imputed where necessary.

The Federal Reserve derives estimates of value-added for the electric and gas utility industries from annual revenue and expense data issued by other organizations. For electric utilities, the measures of value-added incorporate data from the Energy Information Administration of the U.S. Department of Energy and from the Edison Electric Institute. For gas utilities, the value-added estimates incorporate data from the American Gas Association. The weights for aggregation for mining industries are derived from value-added data from the Economic Census. For the mining industries, figures for value-added for the years between the quinquennial Economic Censuses are estimated based on industry-specific nominal output measures (the product of real output indexes and price indexes).

The weights for aggregation, expressed as value-added per unit output, were estimated with data on producer prices for the period after 2022.

Revised Quarterly and Monthly Data

This revision incorporated source data on production, shipments, and inventories that became available or were revised after the regular six-month reporting window for monthly IP was closed. These data were released with too great of a lag to be included with monthly IP estimates but were available for inclusion in the annual revision.

Revised Seasonal Factors

IP indexes are adjusted to remove from the underlying data the predictable movements related to timing, holiday, workday, and monthly or quarterly seasonal patterns. Individual indexes are adjusted using the Census X-13ARIMA-SEATS seasonal adjustment program. The seasonal factors are based on the full history of data back to 1972, where available.

Seasonal factors for indexes based on production-worker hours were updated with data through March 2024. The updated factors for the physical-product-based indexes used data through March 2024, where available. Extreme movements in indexes are often explicitly treated as additive outliers in the seasonal adjustment procedure and thus excluded from the calculation of seasonal factors. Hurricanes that produce extreme drops for industries based in the Gulf Coast region are often specified to be outlier events. In recent years, the pandemic-related swings in most of the indexes were deemed outliers; in addition, February 2021 was deemed an outlier for many industries because of the extreme cold weather that caused widespread outages.

Seasonal factors for unit motor vehicle assemblies were previously updated, and projections through June 2025 are available on the Board's website at https://www.federalreserve.gov/releases/g17/mvsf.htm. These factors are based on production data through January 2024 and were revised back to January 2019. The seasonal factors explicitly incorporate the holiday schedule for the vehicle assembly lines specified in the latest collective bargaining agreements with domestic manufacturers.

Methodological Changes to Individual Production and Capacity Indexes

Change in Source Data for Two Production Indexes

With this revision, the source data for storage batteries (NAICS 335911) have been updated to reflect growth in the production of lithium-ion batteries for automobiles. Previously, the indexes reflected data on production of lead acid motor vehicle batteries from Battery Council International. These data continue to be used and are supplemented with data on production-worker hours for the industry and annual estimates of lithium-ion battery production from Benchmark Mineral Intelligence. The series for storage batteries is unpublished but available upon request.

The source data for ball and roller bearings (NAICS 332991) have been updated as well. The index for ball and roller bearings previously reflected data on the production of bearings from the American Bearing Manufacturers Association (ABMA) in addition to data on production-worker hours. The ABMA report was discontinued, so beginning in 2017 the series is based just on production-worker hours for the industry.

Change to Price Indexes for Semiconductors

With this revision, the price indexes used to deflate the nominal output for three semiconductor (chip) categories have been modified, and the source data used to estimate the product mix within the semiconductor industry have been changed.

Beginning in 2018, price indexes previously used for the subindustry IP indexes for microprocessor units (MPUs), dynamic random-access memory (DRAM), and flash memory have been replaced. Global nominal output of these devices, reported by the Semiconductor Industry Association (SIA), is divided by Federal Reserve Board staff estimates of the number of transistors found on these devices. Transistors have been found to be a reliable indicator of the technical capability (quality) of these chips. This approach was adopted in 2023 for the subindustry IP index for metal-oxide semiconductor (MOS) logic devices excluding MPUs and memory chips.

The source data used to estimate the relative importance weights for the subindustry IP indexes for semiconductors have been changed beginning in 2018. Federal Reserve Board staff estimates for the U.S. share of global production for each semiconductor product were produced using data from Semiconductor Equipment and Materials International.

Data Availability and Publication Changes

Files containing the revised data and the text and tables from this release are available on the Board's website at https://www.federalreserve.gov/releases/g17, as are updated data for the annual revision and for all of the regularly issued series on IP, capacity, and capacity utilization. Other changes are listed on the Board's website at https://www.federalreserve.gov/releases/g17/g17_revision_series.htm.


[1] The revision affected rates of change for IP from 1972 forward. When necessary to maintain consistency with any revisions to the data for 1972 and subsequent years, the levels of production for the years before 1972 were multiplied by a constant. However, the rates of change in IP for the years before 1972 were not revised. Utilization rates and capacity growth rates were revised minimally between 1968 and 1971 but were unchanged before then.
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[2] Rates of change are calculated as the percentage change in the seasonally adjusted index from the fourth quarter of the previous year to the fourth quarter of the year specified.
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[3] The BEA price deflators were discontinued at the six-digit NAICS level after 2011. Overall, at the industry level, the BEA and PPI measures are quite similar, as the BEA used weighted product-level PPIs to derive its industry-level shipments deflator.
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[4] For selected industries, the Federal Reserve constructs price indexes from alternative sources. These industries include communications equipment (NAICS 3342), computer storage devices (NAICS 334112), semiconductors (NAICS 334413), and pharmaceuticals (NAICS 325412).
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Last Update: June 28, 2024