Industrial production increased 0.2 percent in July after an increase of 0.3 percent in June. Growth was slowed by a fall in the production of motor vehicles and parts and by smaller declines in a number of nondurable goods manufacturing industries. Large increases occurred again in the production of commercial aircraft, computers, and semiconductors. In addition, output at utilities surged 1.5 percent, as production moved further toward seasonal norms after unseasonably cool weather in May. At 119.8 percent of its 1992 average, industrial production in July was 3.7 percent higher than it was in July 1996. The rate of industrial capacity utilization slipped to 83.1 percent; during the past twelve months, the rate has ranged between 83.0 percent and 83.6 percent.

After an increase of 0.4 percent in June, the overall output of consumer goods slipped 0.2 percent in July; the production of durable goods was unchanged, and that of nondurable goods fell 0.3 percent. The lack of growth in durable consumer goods resulted from a drop of nearly 15 percent in the production of consumer light trucks, a category that includes vans and sport utility vehicles. In contrast, production gains were widespread among other consumer durables, including sizable increases in the production of appliances, home computers, and audio and video equipment. The fall in the production of nondurable consumer goods resulted primarily from significant declines in the output of clothing, chemical products, paper products, and fuels. Residential electricity sales rebounded further from their big drop in May.

Continuing its strong expansion, the output of business equipment increased 0.5 percent, bringing the index in July to a level 7.4 percent higher than that of the previous July. The growth in business equipment was led by solid gains in the output of business vehicles other than light trucks, by further strong increases in information processing equipment and in commercial aircraft, and by sharp gains in farm and service industry machinery. However, the output of industrial equipment weakened again and has now fallen almost 1.4 percent from its recent peak in April. The output of defense and space equipment fell 0.5 percent.

After a drop of 0.7 percent in June, the output of construction supplies fell another 0.3 percent in July; as a result, the July index for this market group is more than 1.7 percent below its peak in March. The production of materials, however, rose 0.6 percent, led by a large increase in the output of energy materials; coal mining and electricity generation provided much of the boost. The output of durable goods advanced 0.4 percent; gains in the production of equipment parts, particularly semiconductors, more than offset decreases in the production of parts for consumer durables, mainly for motor vehicles. Pushed by increases in chemical and paper materials, the output of nondurable goods materials increased 0.4 percent.

Manufacturing output increased 0.1 percent in July after a 0.3 percent increase in June; excluding motor vehicles and parts, however, production rose 0.2 percent for the third consecutive month. Continuing the pattern of the past several months, the gains in manufacturing output were concentrated in durable goods. Gains were widespread, with only the lumber, primary metals, and motor vehicles and parts industries declining appreciably; increases were especially strong in computers and electrical machinery. The output of nondurable goods declined. Only two nondurables industries, tobacco and paper, saw output gains, while apparel, printing and publishing, petroleum products, and leather had sizable declines.

Mining output decreased 0.3 percent, as a large gain in coal mining was more than offset by substantial drops in other mining industries, especially the drilling of oil and gas wells.

The factory operating rate fell 0.2 percentage point, to 82.1 percent–its lowest level since October 1996. The utilization rate for advanced-processing industries decreased 0.2 percentage point, to 80.1 percent–a level just slightly higher than the rate attained last October. The rate for primary-processing industries decreased 0.3 percentage point, to 86.5 percent–its lowest level since January 1997. The operating rate at mines decreased 0.4 percentage point, to 93.6 percent, while the rate at utilities increased 1.2 percentage point, to 88.8 percent.

				Percent change 		Jul 96 to 
			May 97	Jun	Jul		Jul 97
Total Index		0.0	0.3	0.2		3.7
 Previous estimates	0.2	0.3
Major market groups
 Products, total	0.1	0.4	—0.1		3.2
  Consumer goods	0.0	0.4	—0.2		1.4
  Business equip	0.3	0.7	0.5		7.4
  Const supplies	0.6	—0.7	—0.3		1.8
 Materials		—0.3	0.1	0.6		4.6
Major industry groups
 Manufacturing		0.1	0.3	0.1		3.8
  Durable		0.3	0.5	0.3		5.4
  Nondurable		—0.2	0.0	—0.2		1.8
 Mining			1.8	—0.3	—0.3		4.0
 Utilities		—2.4	0.5	1.5		3.3

							Capacity
							Growth
			Percent of Capacity		Jul 96 to
			May 97	Jun	Jul		Jul 97
Total industry		83.3	83.3	83.1		3.8
 Previous estimates	83.5	83.5
 Manufacturing		82.4	82.3	82.1		4.2
  Advanced processing	80.3	80.3	80.1		5.1
  Primary processing	87.2	86.8	86.5		2.3
 Mining			94.4	94.0	83.6		0.8
 Utilities		87.3	87.6	88.8		1.8

August 14, 1997 Federal Reserve Board

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