Industrial Production Rises Again

By:
Kirk Haverkamp | December 15, 2009

U.S. industrial production picked up 0.8 percent in November, marking five consecutive months without a decline and raising hopes that the economy is truly on the mend.

November’s figures marked the fourth month of gains in the past five months, according to the monthly Industrial Production and Capacity Utilization report from the Federal Reserve, released today. Production numbers had remained flat in October.
 
The industrial production index now stands at 99.4, with 100 representing production levels in 2002, the year the base was established. Overall production remains down 5.1 percent from November 2008.
 
Manufacturing production was up 1.1 percent for the month, following a slight decline in October. Utilities were down by 1.8 percent, which the report attributed to unusually mild weather in November resulting in lower demand for natural gas.
 
Production of consumer goods was up 0.3 percent, marking five consecutive monthly increases. Production of construction supplies posted the largest gain among all categories, up 1.6 percent after declining in each of the two previous months.
 
Utilization of industry capacity was also up, increasing 0.7 percent to 71.3 percent. Capacity utilization is a key economic indicator, because businesses typically do not start expanding again until they have used up their excess capacity, although hiring may increase as they seek to make greater use of existing capacity.
 
Current capacity use remains 9.6 percentage points below its long-term average from 1972 to 2008, and 13.8 percentage points below the high of 85.1 registered in 1988-89.
 
Meanwhile, the Labor Department announced today that the Producer Price Index rose by 1.8 percent in November, driven by a 6.9 percent increase in energy costs. Excluding energy, producer costs rose by 0.5 percent. About 60 percent of the energy cost increase was attributed to a 14.2 percent rise in gasoline prices.

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