Industrial production in the United States faced a setback for the second consecutive month, declining by 0.5 percent in June, according to a statement by Federal Reserve Board.
However, there is a silver lining as manufacturing output showed resilience, advancing by 0.7 percent at an annual rate for the second quarter. The overall performance reflects a mixed picture for the industrial sector. This article will delve into the details of market groups and industry sectors, highlighting both the challenges and positive developments.
Declines across Most Major Market Groups in June In June, most major market groups witnessed declines in their output. The consumer durables index took a significant hit, falling by 2.7 percent. The decline was primarily driven by decreases in the production of appliances, furniture, carpeting, and automotive products, which all experienced notable drops.
Consumer nondurables also faced a decrease of 0.9 percent, with declines seen in clothing, energy, and food and tobacco. Business equipment displayed a mixed performance, with an increase in the information processing index offset by decreases in the transit and industrial sectors. Notably, defense and space equipment were the only market group to register a gain, posting an increase of 1.5 percent or greater.
Manufacturing Output Dips, Motor Vehicles and Parts Drive Growth Manufacturing output declined by 0.3 percent in June. However, for the second quarter, factory output displayed resilience, advancing by 1.5 percent at an annual rate. This growth was bolstered by a significant jump of 36.7 percent in the production of motor vehicles and parts. In June, the indexes for nondurable and durable manufacturing fell by 0.6 percent and 0.1 percent, respectively.
Other manufacturing sectors, such as publishing and logging, experienced a slight decline of 0.2 percent. Within the nondurables category, only chemicals saw an increase, while most other industries recorded declines of at least 1 percent. Notable drops were observed in the indexes for printing and support and petroleum and coal products. On the other hand, durable manufacturing displayed mixed results in June, with declines in motor vehicles and parts and nonmetallic mineral products being offset by gains elsewhere.
Marginal Declines in Output Mining output experienced a minor decline of 0.2 percent in June and faced a 1.1 percent decline at an annual rate in the second quarter. Within the mining sector, a drop of 2.8 percent in the index for oil and gas well drilling was nearly balanced by a gain in oil and gas extraction. The utilities sector faced a more substantial decline, with output falling by 2.6 percent in June and 2.0 percent in the second quarter.
Capacity Utilization: Manufacturing Slightly Below Long-Run Average Capacity utilization for manufacturing slipped to 78.0 percent in June, which is 0.2 percentage points below its long-run average from 1972 to 2022. The mining sector's operating rate declined by 0.1 percentage point to 91.6 percent, while utilities experienced a significant drop of 2.1 percentage points to 68.5 percent. The mining rate remained 5.2 percentage points above its long-run average, while the utilities rate continued to lag well below its long-run average.
In conclusion, the industrial sector faced challenges as industrial production declined for a second consecutive month. However, the manufacturing sector showed resilience with growth in the second quarter. Most major market groups experienced declines, except for defense and space equipment. Within the industry groups, manufacturing output dipped, but motor vehicles and parts were a driving force behind the sector's growth. While the mining and utilities sectors faced marginal declines, capacity utilization remained below its long-run average in manufacturing and utilities.