November 2017 Industrial Production

Industrial production continued growing in November 2017 according to the Federal Reserve.  Rising 0.2 percent, this modest uptick followed the upwardly revised tally of 1.2 percent (originally 0.9 percent) in October.  Including this third consecutive monthly gain, industrial production has increased 3.4 percent during the past year.

Industry group readings were mixed.  Manufacturing, the largest of the three, gained 0.2 percent and is now 2.4 percent higher than a year earlier; virtually all of the monthly uptick was attributed to durable goods which increased 0.4 percent.  Mining output jumped 2.0 percent as oil and gas extractions led the category.  Despite the good news from these first two segments of industrial output, utilities declined 1.9 percent as falling demand for electricity outweighed the increasing need for natural gas. 

While capacity utilization improved in November, it remained below its long-run average.  America’s industrial base used 77.1 percent of its potential, up from 77.0 percent in October.  All three major categories fell short of their individual long-term trends for capacity utilization as well.

Industrial production continued along a familiar path in November; it grew while continuing to fall short of its average capacity utilization rate.  In other words, America’s economy appears to have the capability of producing greater volumes of physically made goods, but something is preventing firms from operating a “normal” rates.  Fortunately, this should help minimize inflation if firms choose to increase their output in the future.  Of course, our economy will need a catalyst to increase utilization.  Some argue the new tax laws from Washington D.C. will do just that, but only time will tell.