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Industrial Production Up 0.2% - Mostly a Hurricane Artifact

 
 

Industrial Production and Capacity Utilization Highlights

  • Industrial production moved up 0.2 percent in November after posting an upwardly revised increase of 1.2 percent in October. Manufacturing production also rose 0.2 percent in November, its third consecutive monthly gain.
  • The output of utilities dropped 1.9 percent.
  • The index for mining increased 2.0 percent, as oil and gas extraction returned to normal levels after being held down in October by Hurricane Nate.
  • Excluding the post-hurricane rebound in oil and gas extraction, total industrial production would have been unchanged in November.
  • Total industrial production was 106.4 percent of its 2012 average in November and was 3.4 percent above its year-earlier level.
  • Capacity utilization for the industrial sector was 77.1 percent in November, a rate that is 2.8 percentage points below its long-run (1972–2016) average.

The above bullet points from the Fed G.17 Industrial Production Report.

https://s3-us-west-2.amazonaws.com/maven-user-photos/mishtalk/economics/zmfATcSa4EegwR7v_znq6Q/4ChHwsZsN0ayEvl6XtNXwg

Capacity Utilization

 
  1. Industrial production is still well below the pre-recession high.
  2. Capacity utilization, assuming it can accurately be measured, has fallen from almost 90% in the early 1970s to 77.1% in November of 2017.

Hurricanes artificially boosted manufacturing production and fourth-quarter GDP. Payback comes in 2018.

By Mike "Mish" Shedlock

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