Total industrial production decreased by 0.1 percent in October after increasing by 0.1 percent in September. Total industrial production is down in four of the last six months. Over the past year, total industrial output is up 3.3 percent (see first chart).
Total industrial capacity utilization decreased 0.2 points to 79.9 percent from 80.1 percent in September. Utilization may be plateauing and is above the long-term (1972 through 2021) average of 79.6 percent, but well below the highs of the 1970s when it was above 88 percent.
Manufacturing output – about 74 percent of total output – posted a 0.1 percent gain for the month, the fourth consecutive increase and seventh in the last nine months (see first chart). From a year ago, manufacturing output is up 2.4 percent.
Manufacturing utilization was unchanged at 79.5 percent, above its long-term average of 78.2 percent. However, it remains well below the 1994-95 high of 84.7 percent.
Mining output accounts for about 16 percent of total industrial output and fell 0.4 percent last month (see top of second chart). Over the last 12 months, mining output is up 6.9 percent. Utility output, typically related to weather patterns and about 10 percent of total industrial output, fell 1.5 percent, the third decline in a row, with natural gas up 3.0 percent but electric down 2.4 percent. From a year ago, utility output is up 2.5 percent.
Among the key segments of industrial output, energy production (about 27 percent of total output) fell 0.9 percent for the month (see bottom of second chart) with declines in consumer energy products (-1.4 percent), primary energy production (-1.2 percent), and converted energy products -0.1 percent). However, oil and gas well drilling was up 0.8 percent while commercial energy products rose 0.1 percent. Total energy production is up 5.2 percent from a year ago.
Motor-vehicle and parts production (about 5 percent of total output) jumped 2.0 percent after a 0.4 percent gain in September (see bottom of second chart). From a year ago, vehicle and parts production is up 10.7 percent.
Total vehicle assemblies rose to 11.07 million at a seasonally-adjusted annual rate. That consists of 10.73 million light vehicles, the highest since August 2020 (see third chart), and 0.34 million heavy trucks. Within light vehicles, light trucks were 8.89 million while cars were 1.84 million. Assemblies have risen sharply from the lows but remained in the lower half of their typical prior range.
The selected high-tech industries index fell 0.6 percent in October (see bottom of second chart) and is up 2.6 percent versus a year ago. High-tech industries account for just 2.1 percent of total industrial output.
All other industries combined (total excluding energy, high-tech, and motor vehicles; about 66 percent of total industrial output) rose 0.1 percent in October (see bottom of second chart). This important category is 1.9 percent above October 2021.
Overall, industrial output fell in October while manufacturing output rose on a gain in motor vehicle production; many other areas were weak. While most measures of economic activity suggest the economy continues to expand, elevated price increases, weak consumer sentiment, an aggressive Fed tightening cycle, and fallout from the Russian invasion of Ukraine remain significant threats to the economic outlook. Caution is warranted.
Robert Hughes
Robert Hughes joined AIER in 2013 following more than 25 years in economic and financial markets research on Wall Street. Bob was formerly the head of Global Equity Strategy for Brown Brothers Harriman, where he developed equity investment strategy combining top-down macro analysis with bottom-up fundamentals.
Prior to BBH, Bob was a Senior Equity Strategist for State Street Global Markets, Senior Economic Strategist with Prudential Equity Group and Senior Economist and Financial Markets Analyst for Citicorp Investment Services. Bob has a MA in economics from Fordham University and a BS in business from Lehigh University.
