Industrial production and capacity utilization for July 1995.

Released for publication August 15

Industrial production was little changed in July for a third consecutive month. Manufacturing output decreased 0.2 percent, but the output of utilities jumped 3.6 percent owing to abnormally high temperatures through much of the month; mining output increased 1 percent. The decline in manufacturing was led by a 3.2 percent drop in the output of motor vehicles and parts, but the output of many other industries also decreased significantly. Gains at producers of electrical machinery, industrial machinery and computer equipment, and paper helped stanch the decline. Small offsetting revisions were made to the output growth estimates for April to June. At 121.3 percent of its 1987 average, industrial production in July was 2.6 percent above its level of July 1994. Capacity utilization decreased 0.2 percentage point in July, to 83.4 percent.

When analyzed by market group, the data show that the output of consumer goods was unchanged in July, as a gain in residential sales by electric utilities was largely offset by a decline in consumer truck production. Despite an increase in the production of appliances, the output of consumer durable goods other than automotive products decreased 0.5 percent, with weakness in furniture and miscellaneous consumer goods. The production of nondurable consumer goods increased 0.4 percent, a rise that was more than accounted for by the increase in electricity sales; decreases in the output of clothing and tobacco products limited the gain.

The production of business equipment picked up 0.4 percent, again led by significant gains in the output of information processing and related equipment; the production of industrial equipment also posted a small gain. The output of transit equipment fell off sharply in July, with decreases in the output of trucks and aircraft and related equipment. The production of other types of business equipment edged down. The output of construction supplies fell; cutbacks occurred in lumber products and fabricated metal products.

The output of durable and nondurable goods materials was little changed, whereas the surge in electricity generation pushed the growth in energy materials to 1.7 percent. Among durable goods materials, decreases in metals and in motor vehicle parts and related equipment were offset by further strong gains among electronics components. Among nondurables, the output of paper materials partly retraced its June loss, but the production of textile materials fell further.

When analyzed by industry group, the data show that factory output fell 0.2 percent in July, with decreases at manufacturers of both durable and nondurable goods; manufacturing production last increased in January. Several major durable goods industries experienced decreases of I percent or more; these industries included transportation equipment, primary metals, fabricated metals products, lumber and products, and miscellaneous manufactures. Another strong advance in the output of computers contributed to an increase of about 1 percent in industrial machinery and equipment; a rise in semiconductor and appliance output contributed to a 2.2 percent increase in electrical machinery. Over the past twelve months, the production of industrial machinery and equipment has increased 9.4 percent, and the output of electrical machinery has risen 13.1 percent. Most nondurable goods industries cut production in July; only the production of paper products, which rebounded from a large drop in June, showed a sizable increase.

The factory operating rate fell 0.5 percentage point in July, retreating further from the peak attained around the turn of the year. Last month's rate, 82.3 percent, is the lowest rate since February 1994 but remains 1 percentage point above the 1967-94 average. The rate for advanced-processing industries has declined about 2 percentage points since its recent peak, while utilization for primary-processing industries has fallen 5 percentage points. The largest decreases in operating rates since last December have occurred in motor vehicles and parts, primary metals, lumber, textiles, apparel, rubber and plastics products, and leather and products.

The initial estimate of the July operating rate at utilities was 90 percent, its highest level this year and just above last year's peak. Gains in coal mining and in oil and gas extraction contributed to an increase of nearly 1 percentage point in the operating rate for mining.

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