Motor Parts Production Leaps 105% in June; Industrial Production Still Beneath Pre-Pandemic Levels

The latest Industrial Production and Capacity Utilization report from the Federal Reserve shows manufacturing production and output continued to recover in June. Industrial production rose 5.4% last month, following a slight gain in May of 1.4%.

The data suggests an industry on a dramatic upswing from a dizzying downturn. The drop in industrial production in March and February was the largest quarterly drop since World War II, and the increase in industrial production for June was the largest monthly increase since 1959. Despite that, most numbers remained at levels below what they were before the pandemic.

While gains were reported in almost all major market groups, vehicle manufacturing posted the most dramatic gains, as industrial production rose 105% and output rose 11.6%. Output of motor parts and vehicles remains nearly 25% below what it was in February.

That leaves the current level of industrial production at 10.9% below where it was before the economic impact of the pandemic struck, leading to a combined drop of 17.1% through March and April. The June figures round out the second quarter of 2020, during which the industrial production output fell 42.6% at an annual rate. Manufacturing output also climbed, but remained 11.1% lower than February levels; Over the course of the second quarter, total output fell 47% at an annual rate.

Production of consumer durables rose 36.6%, business equipment 11.8%, and durable materials 7.4%. Indexes tracking production of business supplies and defense equipment both rose more than 4%. The only market group to post a decrease was energy materials: according to the Federal Reserve, it’s being held down by losses in oil extraction. On a year-over-year basis, industrial production is currently 10.8% lower than it was one year ago.

Capacity utilization for June manufacturing rose 4.6% from May to 66.9%. That’s 7.7 points below its February figure, 76.8%. In durable goods manufacturing, the operating rate rose to 64.3%, and capacity utilization for nondurables rose to 70.6%.

Further gains may be tempered by still-sluggish demand and a disturbing new rise in deaths from the novel coronavirus, which has begun to prompt a second wave of preventative measures, including in California. Orders to close down all but essential businesses contributed strongly to the current economic recession as state and local governments attempted to stifle the spread of the novel coronavirus, but certain areas have seen resurgences or fresh hotspots of the respiratory disease, prompting fears of a second wave of shutdowns.