Industrial production increased 0.7 percent in August, with widespread gains in manufacturing. In addition, output growth in July was revised up 0.2 percentage point to 0.4 percent. The upward revision in July was largely the result of higher manufacturing output–especially nondurables. At 121.3 percent of its 1992 average, industrial production in August was 4.7 percent higher than in August 1996. The rate of industrial capacity utilization rose to 83.9 percent–its highest rate since September 1995.

The acceleration in industrial production between July and August was concentrated in manufacturing; much of it was related to the 10 percent jump in the assembly of autos and light trucks, which had dropped 5 percent from June to July. Excluding motor vehicles and parts, manufacturing production rose 0.7 percent in August, as it had in July, with large increases in the output of commercial aircraft, computers, semiconductors, and primary metals. Output at mines, however, declined 0.9 percent, and that at utilities fell 1.1 percent.

Led by a 2.1 percent advance in the production of durable goods, the overall output of consumer goods grew 0.6 percent in August; the production of nondurable goods advanced 0.3 percent. The gain in consumer durables resulted from the sharp rebound in the output of motor vehicles, which more than offset noticeable declines in the production of appliances and most other consumer durables. Among nondurable consumer goods, the production of non-energy products increased for the second consecutive month, with advances in food and tobacco products and in household chemical and paper products. The output of consumer energy products was unchanged in August because a large gain in the output of automotive gasoline was nearly offset by a drop in residential electricity sales.

The output of business equipment expanded at a 1.9 percent pace, marking a third straight month of sizable gains; this index has increased 11.0 percent since August 1996. While the growth in business equipment was led by solid gains in the output of business vehicles, it was also accompanied by further strong increases in information processing equipment, especially computers and related equipment, and by large gains in commercial aircraft and in farm machinery and equipment. Moreover, after several months of weakness, the production of industrial equipment rebounded with big increases in both July and August. The output of defense and space equipment rose 0.6 percent.

After a drop of 1.2 percent in July, the output of construction supplies recovered partially with a 0.4 percent increase; nevertheless, the August index for this market group was just 0.1 percent above its August 1996 level. Meanwhile, the production of materials posted another sizable gain, led by a 1.5 percent increase in the output of durable goods materials; strong gains in the production of equipment parts, particularly semiconductors, and parts for consumer durables, especially motor vehicles, supplied much of the boost. Energy materials fell 0.9 percent, with noticeable declines in coal mining and electricity generation. The output of nondurable goods materials decreased 0.3 percent; a large gain in container output was more than offset by drops in the other major categories of materials.

Manufacturing output increased 1.0 percent in August after a 0.5 percent increase in July; excluding motor vehicles and parts, production rose 0.7 percent for a second month. The gains in manufacturing output were largely concentrated in durable goods industries, which increased 1.6 percent. In addition to the gain in motor vehicles and parts, there were strong increases in furniture and fixtures, primary metals, fabricated metals, industrial machinery and computers, electrical machinery, aerospace, and instruments. The output of nondurable goods, which had been weak since the beginning of the year, rebounded 0.6 percent in July and gained another 0.3 percent in August. Only two nondurables industries–apparel and paper–had output losses, while tobacco, petroleum, rubber and plastic products, and leather had substantial gains.

A large drop in coal mining largely accounted for the decline in mining output, and losses in electricity generation and sales reduced utility output. Led by a 7.3 percentage point increase in the operating rate at auto and light truck factories, the overall factory operating rate increased 0.5 percentage point, to 83.1 percent–its highest level since September 1995. Similarly, the utilization rate for advanced-processing industries increased 0.6 percentage point, to 81.3 percent–also its highest level since September 1995. The rate for primary-processing industries increased 0.4 percentage point, to 87.3 percent, about the same as its level in March. The operating rate at mines decreased 1.0 percentage point, to 92.2 percent, while the rate at utilities decreased 1.1 percentage points, to 87.4 percent.

			  Percent change 		Aug 96 to
			Jun 97	Jul	Aug		Aug 97
Total index		0.3	0.4	0.7		4.7
<_>Previous 
 estimates		0.3	0.2

Major market groups
 Products, total	0.2	0.2	0.8		4.4
  Consumer goods	—0.1	0.3	0.6		3.1
  Business equip	1.0	1.1	1.9		11.0
  Const supplies	—0.2	—1.2	0.4		0.1
 Materials		0.6	0.9	0.7		5.2

Major industry groups
 Manufacturing		0.4	0.5	1.0		5.3
  Durable		1.0	0.4	1.6		7.4
  Nondurable		—0.3	0.6	0.3		2.9
 Mining			—0.6	—0.5	—0.9		1.3
 Utilities		—0.3	0.5	—1.1		0.5

Capacity Utilization

							Capacity
							Growth
			Percent of Capacity		Aug 96 to
			Jun 97	Jul	Aug		Aug 97
Total industry		83.5	83.6	83.9		3.9
 Previous estimates	83.3	83.1
 Manufacturing		82.5	82.6	83.1		4.2
  Advanced processing	80.6	80.7	81.3		5.1
  Primary processing	86.9	86.9	87.3		2.3
 Mining			93.9	93.2	92.2		1.0
 Utilities		88.2	88.5	87.4		1.8

September 16, 1997 Federal Reserve Board

Consensus National Futures and Financial On Line Index

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