January 15, 2021 Reading Time: 2 minutes

Industrial production rose 1.6 percent in December following a gain of 0.5 percent in November and 1.0 percent in October (see top chart). Industrial output has risen in seven of the last eight 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 3.6 percent and 3.3 percent below the pre-pandemic level in February.

Manufacturing output, which accounts for about 75 percent of total industrial production, rose 0.9 percent after a gain of 0.8 in November and 1.3 percent in October (see top chart). Manufacturing output has risen for eight consecutive months and follows declines of 5.0 percent and 15.8 percent in March and April. The eight consecutive gains still leave manufacturing output 2.8 percent below year-ago levels and 2.6 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 1.6 percent increase in the latest month (see top chart). The gain followed a 2.8 percent jump in November. Over the last 12 months, mining output is down 12.3 percent. Utility output, which is typically related to weather patterns, is about 10 percent of total industrial output, and surged 6.2 percent for the month following a 4.5 percent drop in November. From a year ago, utility output is up 2.7 percent.

Among the key segments of industrial output, energy production jumped 3.8 percent for the month but is still down 73 percent from a year ago. Motor-vehicle production, one of the hardest hit industries during the lockdowns, fell 1.6 percent in December after a 5.0 percent gain in November. Motor-vehicle production is up 3.6 compared with December 2019. Total vehicle assemblies fell to 10.73 million at a seasonally-adjusted annual rate. That consists of 10.40 million light vehicles and 0.33 million heavy trucks. Within light vehicles, light trucks were 8.36 million while cars were 2.03 million.

High-tech industries output rose by 0.8 percent in December, the seventh monthly gain in a row and is up 5.1 percent versus a year ago. All other industries combined (total excluding energy, high-tech, and motor vehicles; about 2/3 of total industrial output) gained 1.1 percent in December but are still 3.0 percent below December 2019. 

Total industrial utilization rose to 74.5 percent in December from 73.4 percent in November. That is well below the long-term (1972-2019) average utilization of 79.8 percent. Manufacturing utilization rose 0.7 percentage points to 73.4 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).

December 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

Bob 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.

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