Industrial Production Shows No Growth...Again for March 2012

The Federal Reserve's Industrial Production & Capacity Utilization report, G.17, shows zero change in industrial production for March 2012, the second month in a row. Manufacturing dropped -0.2%, mining was up +0.2% and utilities increased +1.5%. This report is also known as output for factories and mines.



While total industrial production has increased 3.8% from March 2011, the index is still down 3.4% from 2007 levels. Here are the major industry groups yearly industrial production percentage changes from a year ago.

  • Manufacturing: +4.8%
  • Mining: +4.2%
  • Utilities: -4.6%

Below is the Fed's description of Market groups from the report and their monthly percent changes. The report also gives annualized rates and bear in mind these are much higher than monthly percentage changes by their nature.

The production of consumer goods fell 0.2 percent in March; for the first quarter, output moved up at an annual rate of 2.4 percent. In March, the index for durable consumer goods decreased 0.5 percent, primarily as a result of declines in automotive products and in appliances, furniture, and carpeting. Even so, the output of durable consumer goods increased at an annual rate of 17.6 percent in the first quarter. The production of nondurable consumer goods decreased 0.2 percent in March; the output of non-energy nondurable consumer goods edged down 0.1 percent---all of its major components except miscellaneous consumer nondurables decreased---while the index for consumer energy products declined 0.3 percent.

The production of business equipment moved up 0.2 percent in March, its smallest gain since June 2011; from July 2011 through February 2012, this index had advanced more than 1 percent per month on average. In March, gains in transit equipment and in industrial and other equipment more than offset a pullback of 0.9 percent in the production of information processing equipment. In the first quarter, the output of business equipment advanced at an annual rate of 15.9 percent.

The index for defense and space equipment declined 0.7 percent in March after having gained 2.0 percent in February. This category posted an increase of 5.1 percent at an annual rate in the first quarter.

The production of construction supplies fell 1.3 percent in March after having advanced 1.9 percent in February. For the first quarter, construction supplies recorded an increase of 11.5 percent at an annual rate, its largest gain in nearly two years; nevertheless, production remained about 20 percent below its pre-recession level. The index for business supplies moved up 0.2 percent in March after being unchanged in February.

The output of materials to be further processed in the industrial sector rose 0.2 percent in March and increased at an annual rate of 5.1 percent in the first quarter. The index for durable materials was down 0.3 percent in March, its first decrease since April 2011: The output of consumer parts was unchanged and the production of equipment parts moved up 0.4 percent, but the index for other durable materials fell 0.9 percent. Consumer parts posted an increase of 34.7 percent in the first quarter, its largest advance since the second quarter of 2010. The production of nondurable materials edged up 0.1 percent in March; a gain in chemical materials was mostly offset by a loss in paper materials. The output index for energy materials rose 0.8 percent after three months of declines.

Manufacturing decreased -0.2% in March, but Q1 2012 had an annualized increase of 10.4%, with autos & parts alone increasing, annualized, almost 40% in Q1.

Nonmetallic mineral products dropped -2.4% as a monthly percentage change, Primary metals declined -1.8% and furniture manufacturing's monthly percentage change was -1.7%. This is hard to believe with sky high gas prices, but Petroleum and coal products manufacturing declined -0.9% for the month. Below is a graph of just the manufacturing index, part of industrial production.



Below is another graph of industrial production since September 1990, indexed to that month. Look at the slope, the growth through the 1990's and then compare to 2000 decade. It was in 2000 when the China trade agreement kicked in and labor arbitrage of engineers, advanced R&D, I.T., STEM started in earnest.



Capacity utilization, or of raw capacity, how much is being used, for total industry is now 78.6%, 1.7 percentage points below the average from 1972 to 2011, 80.3%. Capacity growth overall has increased 2.1 percentage points from March 2011.

Capacity utilization is how much can we make vs. how much are we currently using, of what capacity is available now. Capacity utilization is industrial production divided by raw capacity. This month capacity utilization edged down a 10th of a percentage point to 78.6%. The U.S. is still not producing what it is capable of, a reflection of the output gap, (although only in war would one reach 100% capacity).



According to the report, manufacturing uses 77% of capacity, utilities 10.3% and mining 12.8% in 2011 (rounded).

Below is the Manufacturing capacity utilization graph, normalized to 2007 raw capacity levels, going back to the 1990's. Too often the focus is on the monthly percent change, so it's important to compare capacity utilization to pre-recession levels and also when the economy was more humming.



Capacity, on the other hand, is the overall level of plants, production facilities, and ability to make stuff, that we currently have in the United States. Think about a new factory being built, or a factory shut down and it's machinery sold at auction and shipped to China. This is capacity.

The Federal Reserve releases detailed tables for more data, metrics not mentioned in this overview.

If you are baffled by what crude, finished mean from the G.17 report, read these stages of production definitions.

Here is our industrial production report overview from last month, unrevised.

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