, But Still Down 5% from Before Pandemic
Industrial production increased 0.4% in November, the sixth gain in the past seventh month. After falling 16% between February and April, production has increased 14% since then. However, it is still down 5% from February, before the pandemic. And while industrial production continues to improve, the pace of growth has slowed since an initial surge in the late spring and early summer.
Manufacturing output rose 0.8% in November, while mining output rose 2.3%. Utilities production fell 4.3% because of warmer-than-usual weather.
Overall industrial production was down 5.5% on a year-ago basis in November. Manufacturing output was down 3.7% from one year earlier, while utilities output was down 8.9%. The biggest drag was in mining, down 12.5% because of low energy prices.
The capacity utilization rate rose to 73.3% in November from 73.0% in October. While the capacity utilization rate is up from 64.2% in April, it is still well below the 76.9% rate in February. The manufacturing capacity utilization rate was 72.6% in November, up from 72.0% in October. There are huge swathes of excess capacity throughout the U.S. economy that will make it difficult for firms to raise prices. This, in turn, will keep inflation below the Federal Reserve’s 2% objective for the next couple of years, allowing the central bank plenty of leeway to keep interest rates extremely low to support the ongoing economic recovery.
PNC expects continued gradual improvement in industrial production over the next few years. Production will be soft in the near term as record-high COVID-19 cases and a lack of fiscal stimulus weigh on the U.S. economy early next year. But activity should pick up by mid-2021 as vaccine distribution leads to stronger overall economic growth.
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