Industrial Production Rose Again in November
Industrial production rose 0.4 percent in November following a gain of 0.9 percent in October (see top chart). Industrial output has risen in six of the last seven months. However, the gains were not enough to overcome the back-to-back declines of 4.4 percent and 12.7 percent in March and April, respectively. Over the past year, industrial production is down 5.5 percent and 4.9 percent below the pre-pandemic level in February.
Manufacturing output, which accounts for about 75 percent of total industrial production, rose 0.8 percent after a gain of 1.1 in October (see top chart). Manufacturing output has risen for seven straight months and follows declines of 5.0 percent and 15.8 percent in March and April. The seven consecutive gains still leave manufacturing output 3.7 percent below year-ago levels and 3.7 percent below the 2018-2019 average index level (see bottom chart).
Mining output accounts for about 14 percent of total industrial output and posted a 2.3 percent increase in the latest month (see top chart). The gain followed a 0.7 percent decline in October. Over the last 12 months, mining output is down 12.5 percent. Utility output, which is typically related to weather patterns, is about 15 percent of total industrial output, and fell 4.3 percent for the month following a 1.8 percent rise in October. From a year ago, utility output is off 8.9 percent.
Among the key segments of industrial output, energy production fell 0.8 percent for the month and is still down 12.2 percent from a year ago. Motor-vehicle production, one of the hardest hit industries during the lockdowns, jumped 5.3 percent in November after three monthly drops of 1.1 percent in October, 3.2 percent in September, and 3.5 percent in August. Motor-vehicle production is about even compared with November 2019.
High-tech industries output rose by 0.6 percent in November, the sixth monthly gain in a row and is up 4.9 percent versus a year ago. All other industries combined gained 0.4 percent in November and are still 3.6 percent below November 2019.
Total industrial utilization rose to 73.3 percent in November from 73.0 percent in October. That is well below the long-term (1972-2019) average utilization of 79.8 percent. Manufacturing utilization rose 0.6 percentage points to 72.6 percent, well below the long-term average of 78.2 percent and below the 2018-2019 average of 76.1 percent (see bottom of first chart).
November data suggest that while manufacturing output continues to recover, output and utilization remain well below pre-pandemic levels. Furthermore, reinstated government restrictions have the potential to delay the economic recovery, suggesting it may take an extended period of time to return to pre-pandemic levels.
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.
