Industrial production increases 0.8%

Source: Board of Governors of the Federal Reserve System

Jan 26, 2011

Industrial production increased 0.8% in December after having risen 0.3% in November. The rate of change for industrial production was revised down in November but revised up in September and October; the net effect of the revisions from July to November left the level of industrial production in November slightly higher than was previously reported. For the fourth quarter as a whole, industrial production increased at an annual rate of 2.4%, a slower pace than in the earlier quarters of the year. In the manufacturing sector, output moved up 0.4% in December with gains in both durables and nondurables. Excluding motor vehicles and parts, factory output increased 0.5%. The output of mines advanced 0.4%; the output of utilities surged 4.3%, as unusually cold weather boosted the demand for heating. At 94.9% of its 2007 average, total industrial production in December was 5.9% above its level of a year earlier. The capacity utilization rate for total industry rose to 76.0%, a rate 4.6 percentage points below its average from 1972 to 2009.

The production of consumer goods moved up 1.0% in December but fell at an annual rate of 1.6% in the fourth quarter. The output of consumer durable goods declined 0.5% in December. The indexes for all of its major components except home electronics moved down, with the largest decrease occurring for appliances, furniture, and carpeting. For the fourth quarter, the output of consumer durables fell 8.8%, in large part because of a drop of 17.6% in the production of automotive products. The output of nondurable consumer goods rose 1.4% in December, propelled by a gain in consumer energy products, which climbed 6.1%, as both sales to residences by utilities and the production of fuels increased. The production of non-energy nondurables was little changed, as increases in the indexes for clothing and for chemical products offset a decline in the index for paper products; the index for foods and tobacco was unchanged.

The production of business equipment increased 0.6% in December. Widespread gains lifted the output of business equipment at an annual rate of 10.0% for the fourth quarter, a third consecutive quarterly gain of 10.0% or more. For December, the index for transit equipment decreased 0.8%, but the indexes for information processing equipment and for industrial and other equipment rose 1.8% and 0.4% respectively.

The production of defense and space equipment was unchanged in December after having fallen 0.8% in November. In the fourth quarter, the index for defense and space equipment moved down at an annual rate of 3.2% following three consecutive quarterly gains.

The production index for construction supplies decreased 0.8% in December but rose at an annual rate of 4.6% in the fourth quarter. The output of business supplies increased 0.5% in December but was down for the quarter as a whole.

The production of materials rose 1.0% in December. The output of materials increased 4.2% in the fourth quarter, a sixth consecutive quarterly gain. In December, the production of durable materials advanced 0.9%, with gains of more than 1.0% in the indexes for equipment parts and for other durable materials; the output of consumer parts moved down 0.2%. The output of nondurable materials rose 0.7%: An increase of 1.8% in chemical materials more than offset declines in the output of paper and of textiles. The index for energy materials moved 1.3% higher, with widespread gains among its components.

Manufacturing production increased 0.4% in December and rose 3.3% at an annual rate in the fourth quarter. The factory operating rate moved up to 73.2% in December, but it was still 6.0 percentage points below its long-run (1972 to 2009) average of 79.2%. The output of durable goods rose 0.4%, with large gains recorded in primary metals and in computers and electronic products. Output decreased for most of the other major durable goods industries, though the only drop of more than 1.0% was for nonmetallic mineral products. The output of durables moved up at an annual rate of 4.1% in the fourth quarter; output advanced in all of its major industries except motor vehicles and parts and aerospace and miscellaneous transportation equipment. The production of nondurable goods rose 0.5% in December. Gains of 1.0% or more for apparel and leather, for petroleum and coal products, for chemicals, and for plastics and rubber products were partly offset by decreases for textile and product mills, for paper, and for printing. For the fourth quarter, the production of nondurables advanced at an annual rate of 3.2%, about the same pace as for the third quarter.

The index for other manufacturing (non-NAICS), which consists of publishing and logging, was unchanged in December. For the fourth quarter, the index fell at an annual rate of 3.7%, its fourth consecutive quarterly decline. In December, the output of mines moved up 0.4%, and the capacity utilization rate for mining rose to 88.9%, a level 1.5 percentage points above its average from 1972 to 2009. The output indexes for both electric and natural gas utilities increased, as temperatures for December moved well below seasonal norms. The operating rate for utilities was 82.3%, a level 4.4 percentage points below its average from 1972 to 2009.

In December, capacity utilization rates at industries grouped by stage of process were as follows: For the crude stage, the operating rate increased 0.5 percentage point, to 89.0%, a rate that was 2.5 percentage points above its average from 1972 to 2009; for the primary and semifinished stages, utilization moved up 1.1 percentage points, to 73.2%, a rate 8.4 percentage points below its long-run average; and for the finished stage, utilization edged up 0.1 percentage point, to 74.3%, a rate 3.2 percentage points below its long-run average.

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