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Industrial production and capacity utilization.

Released for publication on April 16 Industrial production decreased 0.3 percent in March after declines of 0.9 and 0.5 percent respectively in February and January. The decline in output in March mainly reflected continued weakness in business equipment, construction supplies, and durable materials; production of motor vehicles rose about 2 1/2 percent as a further decline in autos only partially offset a sharp rise in trucks. Total industrial capacity utilization dropped 0.4 percentage point in March to 78.7 percent, its lowest level since September 1986, when the rate was 78.6 percent.

For the first quarter as a whole, industrial production declined at an annual rate of about 9 1/4 percent, after having fallen 7 percent in the previous quarter. At 105.3 percent of its 1987 annual average, total industrial production in March was 3.3 percent below its year-ago level.

In market groups, excluding motor vehicles, the production of consumer goods rose slightly in March after having declined in each of the four preceding months. Among the major components, the output of food and consumer energy products, particularly electricity for residential use, posted gains in March after having declined for several months; however, the output of clothing and goods for the home, such as appliances, carpeting, and furniture, remained depressed.

The production of business equipment excluding autos and trucks decreased again last month and has fallen about 2 1/2 percent since its peak in September of last year. Over this period, the output of industrial equipment has dropped sharply; in contrast, the production of commercial aircraft has increased, and the output of information processing equipment, which includes computers, turned up during the first quarter after having weakened late last year.

Among materials, the output of durables declined again as production of parts for consumer durable goods and equipment were curtailed further. The output of nondurable materials, such as textiles, paper, and chemicals, was little changed last month following a sharp drop in February. The production of energy materials decreased again, owing, in part, to a decline in coal.

In industry groups, manufacturing output fell 0.5 percent in March, reducing the factory utilization rate to 77.4 percent, its lowest rate since August 1983. Operating rates were down 0.5 percentage point for both primary and advanced processing industries. In the six months since last September, the utilization rate for primary processing industries has fallen 6.7 percentage points, while the rate for advanced processing industries has fallen 4.8 percentage points. Outside manufacturing, the operating rate at utilities rose sharply in March, but the rate for mining fell.

The largest declines in utilization for primary processing industries in March were in stone, clay, and glass products, and in fabricated metals. Production of stone, clay, and glass products has fallen dramatically during the past year; its operating rate in March is 10 percentage points below its level a year earlier. Similarly, utilization in lumber, another construction-related industry, is off 13 percentage points from a year earlier. On the positive side, utilization rates in petroleum and primary metals advanced for a second month. Among the advanced processing industries, utilization in motor vehicles and parts increased slightly in March, but the operating rates for most other industries declined.
COPYRIGHT 1991 Board of Governors of the Federal Reserve System
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Publication:Federal Reserve Bulletin
Date:Jun 1, 1991
Previous Article:A review of corporate restructuring activity, 1980-90.
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