Industrial production and capacity utilization for March 1994

Federal Reserve Bulletin, May, 1994

Released for publication April 15

Industrial production rose 0.5 percent in March after a gain of 0.6 percent in February. The output in several industries picked up notably from the weather-related slowdowns of January and February, but the overall increase was held back by a drop in the production of motor vehicles and electricity. Having reached a seasonally adjusted annual rate of 13.9 million units in February, motor vehicle assemblies dropped back to 13.0 million units in March; 1994 marks the first year since the 1970s that assemblies have run at or above a 13.0 million unit pace in any month. At 1156. percent of its 1987 average, industrial production was 5.1 percent higher in March than it was a year earlier. The utilization of total industrial capacity increased 0.2 percentage point, to 83.6 percent.

When analyzed by market group, the data show that output of consumer goods fell back 0.2 percent in March, with gains in home goods and consumer nondurables mostly offsetting a large decrease in automotive products. Within consumer nondurables, production rebounds at a number of manufacturers more than offset a drop in the sale of electricity for home use.

The output of business equipment rose 0.7 percent despite the cutback in the output of motor vehicles and the continued decline in commercial aircraft manufacturing. The production of information processing equipment continued advancing rapidly; in addition, the production of industrial and other equipment picked up again, gaining more than 1 percent after having slipped back somewhat during January and February. The output of defense and space equipment fell further in March; it has declined about 10 percent during the past year.

The production of construction supplies, which fell about 1 percent per month in January and February as cold weather curtailed construction activity, advanced 1.1 percent in March. The production of industrial materials rose 0.8 percent, with strong gains in computer parts and semiconductors. The output of energy materials increased despite the cutback in electricity generation; coal mining strenghtend again in March after a 10 percent jump in February.

When analyzed by industry group, the data show that manufacturing output increased 0.6 percent in March, with gains in all major industires other than transportation equipment. The factory operating rate rose 0.3 percentage point, 82.8 percent. Capacity indexes for computers, semiconductors, light trucks, and appliances were revised up slightly for early this year; the aggregate effect of these revisions was to lower factory utilization for March by 0.1 percentage point from what it otherwise would have been. During the past year, utlization in manufacturing has increased 2.7 percentage points, while output has risen 5.8 percent. The output gain is the largest twelve-month increase in six years.

The utilization rate for primary-processing industires rose 0.6 percentage point, to 68.4 percent, about 4 percentage points more than is 1967-93 average but 2.7 percentage points less than its high during 1988 and 1989. Output increases of nearly 1 percent or mor ein stone, clay, and glass products, paper and products, rubber and plastics products, and textiles helped boost the primary-processing operating rate. The utilization rate for advanced-processing industries edge up 0.1 percentage point, to 81.3 percent, as a decrease of 2.4 percentage points in utilization for transportation equipment was more than offset by gains in other industries.

The increase is coal mining pushed up the overall output of mining 1 percent in March. The output of utilities fell back again as temperatures returned to about their seasonal norms.