Industrial Production and Capacity Utilization for July 1998

Federal Reserve Bulletin, September 1998 | Go to article overview

Industrial Production and Capacity Utilization for July 1998


Industrial production declined 0.6 percent in July after a drop of 1.1 percent in June; the June decline was larger than previously estimated. Some of the downward revision for June was the result of more complete information on production losses associated with strikes at key General Motors parts plants, which began in early June and were settled in late July. Motor vehicle assemblies dropped from a seasonally adjusted annual rate of 12.4 million units in May to 8.3 million units in July; output of motor vehicle parts also contracted sharply. Excluding motor vehicles and parts, industrial production edged up in July after having declined 0.4 percent in June; included in this special aggregate are industries, such as primary and fabricated metals and tires, that supply the automobile industry and were affected

by the shutdowns. At 126.8 percent of its 1992 average, industrial production in July was 1.8 percent higher than it had been in July 1997; excluding the output of motor vehicles and parts, the twelve-month increase was 3.0 percent. From May to July, capacity utilization in manufacturing, mining, and electric and gas utilities dropped 1.9 percentage points, to 80.5 percent.

MARKET GROUPS

The output of consumer goods, which declined 0.9 percent in July, reflected the drop in motor vehicles. In other categories of consumer goods, the production of appliances and air conditioners rebounded from a dip, and the output of home electronics continued to advance. The production of consumer nondurables eased slightly further after a loss in June. Within this group, the output of non-energy products, which includes foods, clothing, chemical products, and paper products, has been weak, on balance, over the past few months.

The production of business equipment fell 0.9 percent, largely because of the drop in business vehicles. The output of industrial equipment declined after a large gain in June. Led by gains in computers and farm machinery, the production of information processing and other equipment advanced again.

The output of construction supplies rose 0.3 percent and was 4 percent above the level reached last July. The production of materials, which had declined 1.4 percent in June, eased another 0.4 percent. The weakening was most evident in durable goods materials used to make motor vehicles; the output of consumer durable parts fell another 5 1/2 percent after having declined nearly 10 percent in June. In addition, basic metals fell for a third month. The output index for nondurable materials eased for a third month, with widespread weakness in textile, paper, and chemical materials. Energy materials rebounded 1.0 percent from a decline of the same size in June.

INDUSTRY GROUPS

Manufacturing output fell 0.7 percent in July, having declined 1.2 percent in June; the production of motor vehicles and parts fell about 15 percent in each month, and the output of primary and fabricated metals weakened as well. The output of most other durable goods industries, such as computers, aircraft, instruments, and lumber, advanced in July. The production of nondurables eased for a third month; it has fallen about I percent since April, with declines in the output of paper and products, foods, apparel, and leather and products. In July, mining recouped a bit of its June drop while the output at utilities was flat.

The factory operating rate fell 0.9 percentage point, to 79.0 percent, and was more than 2 percentage points below the level in May. Much of this drop-off reflects the effects of the strike-induced plunge in the output of motor vehicles and related parts and materials. However, the operating rates in miscellaneous manufactures, paper and products, and some other nondurable industries have also moved lower in recent months, as has the rate for oil and gas well drilling. Utilization rates remained relatively high for petroleum refining and electric utilities. …

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