Industrial Production and Capacity Utilization for February 1999

Federal Reserve Bulletin, April, 1999

Released for publication March 16

Industrial production increased 0.2 percent in February. Mining production rose 0.4 percent, the first increase in a year, while production at utilities decreased 0.6 percent. Manufacturing output increased 0.2 percent, the fifth consecutive month of increase in that industry group. At 132.6 percent of its 1992 average, industrial production in February was 1.9 percent higher than it had been in February 1998. Overall capacity utilization in February slipped 0.1 percentage point, to 80.3 percent, a level 1 3/4 percentage points below its long-term average and 2 1/4 percentage points below its February 1998 level.

MARKET GROUPS

The output of durable consumer goods increased 0.9 percent, a rise buoyed by large increases in the production of appliances and home electronics. In contrast, the production of automotive products edged down 0.1 percent after a strong gain in January. The output of nondurable consumer goods excluding energy decreased for the third consecutive month; part of the decline is attributable to softness for clothing and paper products. The output of consumer energy products, which has been volatile recently, fell 1.1 percent, reversing only part of the 2.8 percent gain in January.

The production of business equipment increased 0.2 percent after having been flat in January. Declines in the output of industrial equipment and transit equipment were more than offset by gains in information processing equipment and other equipment. The gain in the other equipment group resulted from a jump in farm equipment, although output of the latter remains below its level in the first half of 1998. The output of construction supplies edged down 0.1 percent after four consecutive months of increases. The production of business supplies was flat.

A strong increase in the production of semiconductors contributed to the 0.6 percent increase in the production of durable goods materials. The output of basic metals fell 0.1 percent, and the level of production remained more than 6 percent less than in February 1998. The production of nondurable materials slipped 0.3 percent, a decline reflecting weakness in chemicals and paper materials. The production of energy materials edged up 0.2 percent.

INDUSTRY GROUPS

Manufacturing output grew 0.2 percent, with a 1/2 percent gain in the production of durable goods and a slight pullback in the production of nondurable goods. Durable goods industries that posted increases in production included furniture and fixtures, industrial machinery, electrical machinery, and instruments. Those in which output fell included lumber; aircraft, which continued to edge down from the very high level achieved last year; and motor vehicles and parts, which slipped again although remaining at a high level. The production of nondurable goods edged down 0.2 percent after having declined 0.1 percent in January. Losses were widespread; gains were posted in tobacco products, chemicals, and rubber and plastic products. Mining production increased, as gains in coal output outweighed losses elsewhere.

The factory operating rate slid 0.1 percentage point, to 79.5 percent--2 1/4 percentage points below the level of February 1998. The utilization rate for advanced-processing industries inched down just 0.1 percentage point, while the utilization rate for primary-processing industries fell 0.4 percentage point. The utilization rate for mines edged up 0.2 percentage point but remained well below its long-term average. Temperatures were relatively warm, as has been the case all winter, and the operating rate for utilities dipped to 89.8 percent.

NOTICE

The capacity estimates in this month's release incorporate a small change in the method used to interpolate the annual estimates of capacity growth to the monthly frequency. The previous monthly capacity figures were computed assuming that capacity growth is constant from the beginning of a year to the end, with potentially abrupt changes in growth rates between the last months of one year and the first months of the next. The new procedure allows capacity growth rates to change smoothly over time; it has been applied to data beginning with October 1998. At the most detailed industry level, the new capacity estimates maintain the same fourth quarter over fourth quarter growth rates that were calculated under the previous procedure. Table 4 now shows fourth quarter over fourth quarter growth rates instead of December over December rates.

[CHART OMITTED]

Industrial production and capacity utilization, February 1999

                       Industrial production, index, 1992 = 100

Category                        1998                 1999

                          Nov.(r)   Dec.(r)    Jan.(r)   Feb.(p)
Total                       132.2    132.4     132.4      132.6

Previous estimate           132.3    132.5     132.5       ...

Major market groups
Products, total(2)          124.5    124.4     124.5      124.5
 Consumer goods             114.8    115.0     115.1      115.1
 Business equipment         168.1    167.5     167.5      167.8
 Construction supplies      129.6    131.1     131.6      131.5
Materials                   144.6    145.3     145.2      145.7

Major industry groups
Manufacturing               136.4    136.6     136.7      136.9
 Durable                    161.0    161.2     161.5      162.3
 Nondurable                 111.6    111.7    1116.0      111.4
Mining                      101.1    100.0      97.0       97.4
Utilities                   110.6    112.5     114.6      114.0

                        Industrial production, index, 1992 = 100

                                    Percentage change
Category
                                1998(1)             1999(1)
                          Nov.(r)    Dec.(r)    Jan.(r)   Feb.(P)
Total                        -.2         .2       .0      .2

Previous estimate            -.1         .2       .0      ...

Major market groups
Products, total(2)           -.3         .0       .0      .0
 Consumer goods              -.4         .2       .1      .0
 Business equipment          -.6        -.3       .0      .2
 Construction supplies        .9         .1       .4     -.1
Materials                     .1         .4       .0      .3

Major industry groups
Manufacturing                 .2         .1       .1      .2
 Durable                     -.1         .2       .2      .5
 Nondurable                   .7        -.1      -.1     -.2
Mining                       -.9       -1.0     -3.0      .4
Utilities                   -5.1        1.7      1.9     -.6

                           Percentage change
Category
                           Feb. 1998 to
                           Feb. 1999
Total                        1.9

Previous estimate            ...

Major market groups
Products, total(2)           1.7
 Consumer goods              -.2
 Business equipment          6.9
 Construction supplies       4.6
Materials                    2.2

Major industry groups
Manufacturing                2.4
 Durable                     5.4
 Nondurable                 -1.2
Mining                      -9.4
Utilities                    4.5

                           Capacity utilization, percent

                      Average,   Low,    High,    1998      1998
                      1967-98    1982    1988-89
                                                  Feb.    Nov.(r)

Total                   82.1   71.1      85.4    82.6      80.8
Previous estimate                                          80.9
Manufacturing           81.1   69.0      85.7    81.8      80.1
 Advanced processing    80.5   70.4      84.2   807.0      79.4
 Primary processing     82.4   66.2      88.9   847.0      82.4
Mining                  87.5   80.3      88.0   899.0      83.8
Utilities               87.4   75.9      92.6    86.6      87.3

                           Capacity utilization, percent

                                                        Memo
                                                        Capacity,
                           1998          1999           percentage
                                                        change,
                                                        Feb. 1998
                                                              to
                         Dec. (r)   Jan.(r)   Feb.(p)   Feb. 1999

Total                        80.7      80.4      80.3         4.8
Previous estimate            80.8      80.5       ...         ...
Manufacturing                79.9      79.6      79.5         5.3
 Advanced processing         78.9      78.5      78.4         6.4
 Primary processing          82.8      83.0      82.6         2.7
Mining                       82.9      80.3      80.5         1.1
Utilities                    88.7      90.4      89.8          .8