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Industrial production and capacity utilization.

Industrial Production and Capacity Utilization

Released for publication on December 14

Industrial production fell 1.7 percent in November after a decline of 0.9 percent (revised) in October. A 20 percent drop of motor vehicle assemblies coupled with a sharp curtailment in output of related parts and materials accounted for more than half of the overall loss. In addition, production at utilities fell 3.6 percent, owing mainly to unseasonably warm weather. Elsewhere, industrial output declined noticeably for the third successive month. Total industrial capacity utilization dropped 1.5 percentage points to 80.9 percent, its lowest level since May 1987. At 107.5 percent of its 1987 annual average, total industrial production in November was 0.6 percent below its level of a year ago.

In market groups, output of consumer goods other than motor vehicles was curtailed sharply again in November. The production of goods for the home, such as appliances and furniture, has weakened considerably since June, and clothing output continued its downward trend evident throughout this year. The output of consumer energy products, particularly gasoline and electricity for residential use, also declined sharply in November. The production of business equipment other than autos and trucks was reduced about 1/4 percent in November, after a decrease of about 1/2 percent in October. This recent weakness has been concentrated in industrial equipment; output in this sector had risen sharply, on balance, between March and September. In November, the production of construction supplies dropped further and was nearly 7 percent below the recent high levels reached early this year. Apart from the decline in parts and materials for motor vehicles, the most significant decreases in output of materials occurred in the energy components, particularly in electricity generation and coal mining. Among other materials, production of textiles fell again, and output of basic metals edged down after having declined sharply in the previous two months; in contrast, production of paper materials continued to be well maintained.

In industry groups, manufacturing output fell 1.7 percent in November; the factory utilization rate fell 1.6 percentage points to 80 percent, its lowest level since January 1987. Excluding motor vehicles and parts, manufacturing output fell 0.8 percent in November, after a decline of 0.7 percent in October and a drop of 5.0 percent in September. The utilization rate at mines was unchanged in November, but the operating rate for utilities fell sharply again.

For the second month, declines were widespread throughout manufacturing. Output of durable goods fell 2.5 percent in November; a decrease of more than 8 percent in transportation equipment accounted for about half the decline, while production of furniture, lumber, and fabricated metals also dropped sharply. Output of nondurable goods fell 0.6 percent in November, and declines were somewhat less widespread than those in durables.

Utilization in both primary and advanced processing industries fell sharply in November. The operating rate for primary processing now stands at 82.4 percent, about the same as its 1967-89 average. The weakest primary processing industries are lumber and textiles, in which utilization rates are well below their longer-run averages. Most other primary processing industries still show above-average operating rates despite the recent declines. In contrast, utilization for advanced processing industries has fallen to 78.9 percent, more than 2 percentage points below its longer-run average. Rates for motor vehicles and parts, apparel, printing and publishing, and instruments are all more than 4 percentage points below their respective longer-run averages.
COPYRIGHT 1991 Board of Governors of the Federal Reserve System
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Federal Reserve Bulletin
Date:Feb 1, 1991
Words:583
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