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Industrial production and capacity utilization.


Industrial production fell 0.6 percent in December after declines of 1.8 and 0.7 percent (revised) in November and October. In December, motor vehicle assemblies and output of related parts and materials dropped sharply further, accounting for much of the overall decline. In addition, production of construction supplies was reduced again and has fallen more than 6 percent since July. Total industrial capacity utilization dropped 0.6 percentage point in December to 80.4 percent, its lowest level since April 1987. For the fourth quarter as a whole, industrial production declined at about an 8 percent annual rate from the third quarter. At 107.1 percent of its 1987 annual average, total industrial production in December was 1.4 percent below its year-ago level.

In market groups, the output of consumer goods other than motor vehicles rose 1/2 percent in December after a decrease of I percent in the previous month. This increase mainly reflected further gains in food processing and a partial rebound in utility output for residential use; production of both clothing and appliances was little changed from depressed November levels. Output of business equipment other than autos and trucks declined nearly 4 percent at an annual rate in the fourth quarter, owing mainly to weakness in both industrial and information-processing equipment. Output of materials was curtailed again in December, with the most pronounced drops occurring in the production of parts and related materials for the motor vehicle industry. Output of nondurable materials, such as textiles, paper, and chemicals, also declined in recent months. The production index for energy materials, particularly electricity generation, rose last month, but its level for the fourth quarter was well below that of the third quarter.

In industry groups, manufacturing output fell 0.9 percentage point in December, lowering the factory utilization rate to 79.3 percent, its lowest level since January 1987. Excluding motor vehicles and parts, manufacturing output declined 1/2 percent. Outside manufacturing, the operating rate at utilities rose sharply, while the rate for mining advanced moderately.

Within manufacturing, the utilization rate for primary processing industries fell 1.4 percentage points while the rate for advanced processing industries declined 0.7 percentage point. The drop in primary processing industries reflected significant output cutbacks at industries that supply the auto industry, such as primary metals, fabricated metals products, rubber and plastics products, and textiles. Production at petroleum refiners also fell significantly for the second month in a row; its operating rate has dropped 5 percentage points since October.

The decline in utilization for advanced processing resulted from the significant production cuts at motor vehicle manufacturers and in the nonelectrical machinery industry. Elsewhere, output was little changed.TABULAR DATA OMITTED
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:Mar 1, 1991
Previous Article:Monetary policy report to the Congress.
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