Posted March 28, 2023

Fed revises industrial production – growth was slightly lower

On March 28, the Federal Reserve said it revised its index of industrial production (IP) and the related measures of capacity and capacity utilization. On net, revisions to total IP pushed its growth rates slightly lower in recent years; the rates of change for total IP have revised no more than 0.6 percentage point in any year. Similarly, the utilization rates for total industry are little changed from previous estimates.

This revision incorporated detailed data for manufacturing from the U.S. Census Bureau's 2021 Annual Survey of Manufactures (ASM). The aggregate effect of those data was slightly slower growth in overall IP in 2021. The overall picture of the last three years of performance in the industrial sector, however, is unchanged. After contracting sharply in the first half of 2020 because of the pandemic, the industrial sector rebounded later in the year and in 2021, and then exhibited more modest growth in 2022.

In the fourth quarter of 2022, capacity utilization for total industry stood at 79.9 percent, about 1 percentage point above its previous estimate and 0.2 percentage point above its long-run (1972–2022) average. Most of the upward revision to utilization reflects modest downward revisions to estimates of capacity. The utilization rates for 2019 to 2021 are close to previous estimates—within 1/2 percentage point—and revisions to earlier years are very small.

Annual capacity growth for the industrial sector is revised down by about 3/4 percentage point per year, on average, in 2021 and 2022; earlier-year revisions are very small. Capacity for total industry at the end of 2022 is now estimated to be nearly 1 percent lower than at the end of 2018, as opposed to about 1 percent higher prior to the revision.

This revision incorporated newly available annual data on both output and prices. As noted earlier, the updated IP indexes incorporated new data for manufacturing from the U.S. Census Bureau's 2021 ASM. For publishing, the IP indexes folded in data for 2021 from the Census Bureau's Service Annual Survey. In addition, the indexes for metallic and nonmetallic minerals were updated with revised annual data for 2020 and with new data for 2021 from the U.S. Geological Survey (USGS). Data on prices from the Bureau of Labor Statistics (BLS) were also incorporated into most of the manufacturing indexes.

The monthly estimates of production have been updated to include late-arriving or revised quarterly or monthly indicator data, including information from the BLS's benchmark revisions to the Current Employment Statistics. The IP estimates also reflect updated seasonal factors.

The revised estimates of capacity and capacity utilization incorporated data from the Census Bureau's Quarterly Survey of Plant Capacity Utilization for the fourth quarters of 2021 and 2022 along with new data on capacity from the USGS, the Energy Information Administration, and other organizations. The revised capacity estimates also included new data on capital spending from the 2021 ASM.


Industrial Production: Manufacturing output is now estimated to have been about 3 percent lower in the fourth quarter of 2020 than it was a year earlier; it moved up about 3-1/2 percent in 2021 and another 3/4 percent in 2022. The rates of change for 2020 and 2021 are respectively about 1/2 percentage point and 3/4 percentage point weaker than the estimates published previously, whereas the rate of change for 2022 is about 1/4 percentage point stronger. Manufacturing output is now estimated to have dropped more than 19 percent between February 2020 and April 2020 because of the pandemic, about the same as was previously reported. Factory output has recovered since then, and the index for February 2023 is currently reported to be about 3/4 percent above its pre-pandemic level, about 1/2 percentage point less of a gain than the pre-revision estimate.

The revised contour for mining output shows a sharp drop in the first half of 2020 and a substantial rebound later in 2020 and in 2021, followed by continued but more moderate growth in 2022. The rates of change are broadly similar to those published previously, although the gains in 2021 and 2022 are now each about 3/4 percentage point weaker, and the drop between the fourth quarters of 2019 and 2020 is about 1/3 percentage point smaller. The index for mining currently stands about 3-1/4 percent below its pre-pandemic level; before the revision, the index was 2-1/3 percent below its pre-pandemic level. The rates of change for utilities output are little changed from their previously reported values.

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