August 2018 Industrial Production

Industrial production was strong in August 2018 according to the latest data from the Federal Reserve. Output of all physically made wares increased 0.4 percent.  Perhaps more importantly, this uptick was on the heels of July’s upwardly revised tally which also grew 0.4 percent (originally 0.1 percent), and June’s increase of 0.4 percent as well.  Year-over-year, this indicator grew 4.9 percent, best since December 2010.  Impressive.

All three major categories advanced in the period.  Mining output increased 0.7 percent and jumped 14.0 percent over the last 12 months, buttressed by the oil and gas sectors.  The index for utilities jumped 1.2 percent in the period as growing electricity demand outweighed the decline in gas utilities.  Finally, manufacturing, the largest segment, added 0.2 percent to its total and was 3.1 percent higher versus a year earlier. By its components, durable goods led the August uptick, rising 1.0 percent, while nondurable goods declined 0.5 percent, and publishing and logging lost 0.9 percent. 

Capacity utilization edged higher in August.  The nation used 78.1 percent of its industrial potential, up from 77.9 in July.  This most recent tally puts utilization 1.7 percent lower than the average from 1972 through the end of last year.  Manufacturing utilization edged higher but is still 2.5 percent below its long-run average.  The operating rate for mining remains well above its average, reaching 92 percent in August.  Lastly, utilities utilization rose to 78.0 percent but still has 7 percentage points before it reaches its average. 

August was a good month for this indicator.  Manufacturing remains in an uptrend.  This is important for two reasons: first, it is the largest component in industrial production, and, secondly, it tends to move along the contours of the business cycle.  From the vantage point of this release, America’s economic trend continues moving higher.