Industrial Output Fell, but Manufacturing Output Rose Slightly in August
Total industrial production decreased 0.2 percent in August after increasing 0.5 percent in July. Over the past year, total industrial output is up 3.7 percent (see first chart).
Total industrial capacity utilization decreased 0.2 points to 80.0 percent from 80.2 percent in July. The August utilization is above the long-term (1972 through 2021) average of 79.6 percent but well below the highs of the 1970s when it was above 88 percent.
Manufacturing output – about 74 percent of total output – posted a modest 0.1 percent gain for the month, the second consecutive increase and fourth in the last six months but also the smallest over that period (see first chart). From a year ago, manufacturing output is up 3.3 percent.
Manufacturing utilization was unchanged at 79.6 percent, holding above its long-term average of 78.2 percent. However, it remains well below the 1994-95 high of 84.7 percent.
Mining output accounts for about 16 percent of total industrial output and was unchanged last month following three strong monthly gains (see top of second chart). Over the last 12 months, mining output is up 8.4 percent. Utility output, typically related to weather patterns and about 10 percent of total industrial output, fell 2.3 percent, with natural gas up 0.6 percent but electric down 2.9 percent. From a year ago, utility output is down 1.6 percent.
Among the key segments of industrial output, energy production (about 27 percent of total output) fell 0.4 percent for the month (see bottom of second chart) with gains in oil and gas well drilling unable to offset declines in primary energy production, consumer energy products, converted energy products, and commercial energy products. Total energy production is still up 4.7 percent from a year ago. Motor-vehicle and parts production (slightly under 5 percent of total output), one of the hardest-hit industries during the lockdowns and post-lockdown recovery, fell 1.4 percent after a surge of 3.2 percent in July (see bottom of second chart). From a year ago, vehicle and parts production is up 10.2 percent.
Total vehicle assemblies rose to 10.48 million at a seasonally-adjusted annual rate. That consists of 10.16 million light vehicles (see third chart) and 0.31 million heavy trucks. Within light vehicles, light trucks were 8.38 million while cars were 1.78 million. Assemblies have risen sharply from the lows but remained at the bottom of their prior typical range.
The selected high-tech industries index gained 0.3 percent in August (see bottom of second chart) and is up 5.8 percent versus a year ago. High-tech industries account for just 2.1 percent of total industrial output.
All other industries combined (total excluding energy, high-tech, and motor vehicles; about 66 percent of total industrial output) was unchanged in August (see bottom of second chart). This important category is 2.6 percent above August 2021.
Overall, industrial output was little changed in August. Manufacturing output gained despite ongoing labor shortages and turnover, rising costs and shortages of materials, and logistics and transportation bottlenecks. Elevated price increases, weak consumer sentiment, an aggressive Fed tightening cycle, fallout from the Russian invasion of Ukraine, and Covid-19-related problems in China remain significant threats to the economic outlook. Caution is warranted.
Robert Hughes
Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals. Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
