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INDUSTRIAL UPDATE

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Industrial Production & Capacity Utilization

Industrial production fell 0.6 percent in July after increasing 0.3 percent in June. Early July shutdowns concentrated in the petrochemical and related industries due to Hurricane Beryl held down the growth of industrial production by an estimated 0.3 percentage point. Manufacturing output stepped down 0.3 percent as the index for motor vehicles and parts fell nearly 8 percent; manufacturing excluding motor vehicles and parts rose 0.3 percent. The index for mining moved sideways while the index for utilities decreased 3.7 percent. At 102.9 percent of its 2017 average, total industrial production in July was 0.2 percent below its year-earlier level. Capacity utilization moved down to 77.8 percent in July, a rate that is 1.9 percentage points below its long-run (1972–2023) average. 

Industrial Production Index

(For July 2024)

102.9

Total Industrial Production Index

-0.19% (YOY)

Published by the Federal Reserve, the Industrial Production Index (IPI) is a monthly metric that gauges the actual production levels in sectors such as manufacturing, mining, and utilities, compared to a reference year.

99.5

Manufacturing

+0.1% (YOY)

118.6

Mining

-1.5% (YOY)

94.0

Business Equipment

-2.1% (YOY)

105.1

Materials

-0.4% (YOY)

100.5

Construction

-0.2% (YOY)

Monthly 2022 vs 2023 vs 2024:

Capacity Utilization

(For July 2024)

77.8

Total Capacity Utilization Index

-2.14% (YOY)

The percentage measure of how efficiently a country or business is using its potential manufacturing and production capabilities.

77.2

Manufacturing

+1.3% (YOY)

88.8

Mining

-0.2% (YOY)

Monthly 2022 vs 2023 vs 2024:

Industrial Labor

In July, the US job market showed signs of cooling as job growth slowed down. The US Bureau of Labor Statistics reported an addition of 114,000 jobs, below the expected 175,000. The unemployment rate edged up to 4.3%. Economists suggest this uptick is tempered by stable layoff rates rather than increasing job losses.
 
Notably, Manufacturing and Engineering emerged as strong sectors, adding 5,000 jobs collectively. However, unemployment in these industries also rose slightly to 3.6%. This data highlights areas of growth and shifts within the job market.
Manufacturing Sector Unemployment Rates

(For July 2024)

3.6%

Manufacturing Unemployment Rate

+33.3% (YOY)

Indicates the percentage of individuals in machinery manufacturing who are 16 years or older and are nonagricultural private wage & salary workers without a job.

2.7%

Machinery

+0% (YOY)

3.2%

Chemical

+77.7% (YOY)

3.9%

Petroleum & Coal

-48% (YOY)

3.5%

Electrical Equipment

+218.1% (YOY)

2.6%

Computer & Electronics

-7.1% (YOY)

5.8%

Food

+114.8% (YOY)

Monthly 2022 vs 2023 vs 2024:

Manufacturing Sector PPI

(For July 2024)

249.7

Manufacturing Producer Price Index

+1.74% (YOY)

The producer price index quantifies the percentage fluctuation in prices that domestic producers receive for goods and services.

184.5

Machinery

+5.51% (YOY)

354.1

Chemical

+0.13% (YOY)

344.9

Petroleum & Coal

+0.06% (YOY)

202.1

Electrical Equipment

+2.44% (YOY)

101.6

Computer & Electronics

+2.48% (YOY)

260.0

Food

+2.67% (YOY)

184.1

Paper

+0.29% (YOY)

Monthly 2022 vs 2023 vs 2024:

Shipping

July saw significant fluctuations in dry van load post volumes, primarily influenced by retail events such as back-to-school shopping and Amazon Prime Day. Despite a momentary surge in load post volumes early in the month, the overall trend showed a retreat in subsequent weeks. Comparatively, this year’s volumes have occasionally surpassed the average levels from the past seven years, excluding the pandemic years of 2020 and 2021.

Carrier equipment posts varied throughout the month, reaching their lowest since 2017 but generally remained stable. This inconsistency in equipment availability contributed to fluctuations in the dry van load-to-truck ratio (LTR), which saw peaks and declines but remained notably high compared to historical data from the last seven years.

Overall, the dry van sector experienced a dynamic month, with load volumes and equipment availability responding sharply to retail-driven demand and then normalizing. This pattern underscores the continuing impact of seasonal retail activities on freight movement.

(For July 2024)

$2.06

Dry Van Spot Rates

-1.90% (YOY)

$2.47

Flatbed Spot Rates

-2.75% (YOY)

4.18

Dry Van Load-To-Truck Ratio

+14.83 (YOY)

11.89

Flatbed Load-To-Truck Ratio

+25.95% (YOY)

Environmental / Sustainability

Fossil Fuels and Renewable Energy

  • Fossil Fuels: Coal consumption and production continue to decline, reflecting a shift towards renewable energy sources and the retirement of coal power plants.
  • Renewable Energy: There’s significant growth in renewable energy, particularly in solar power, which is expected to increase substantially in electricity generation capacity.

Electricity

  • General Trends: Electricity generation from coal is projected to decrease, with natural gas and renewable sources filling the gap. This shift supports the increasing share of renewables in the energy mix, indicating a move away from traditional fossil fuels.

Petroleum

  • Market Dynamics: The petroleum market remains volatile, influenced by geopolitical tensions and supply disruptions. However, the situation is expected to stabilize with increased production and a slight decline in demand.

Natural Gas

  • Consumption and Production: Natural gas consumption reached record levels in early 2024 due to cold weather but is expected to stabilize. Production disruptions due to weather have affected supply but are anticipated to normalize.

Crude Oil

  • Production Trends: U.S. crude oil production saw a peak in late 2023 but experienced slight disruptions. Recovery is expected to stabilize production throughout 2024.

Coal

  • Industry Outlook: Coal production is expected to decrease by about 19% in 2024, continuing the industry’s contraction. Coal’s role in electricity generation is decreasing, favoring more sustainable energy sources, though it remains a significant part of the energy mix.

Industrial CO2 Emissions

(For April 2024)

103M

Metric Tons of CO2 Emitted

-2.83% (YOY)

This is a monthly indicator displaying the amount of CO2 emissions in the industrial sector in Million of metric tons.

7M

Coal

0.0% (YOY)

45M

Chemical

-2.1% (YOY)

27M

Petroleum

-3.5% (YOY)

25M

Pharma & Biotech

-3.84% (YOY)

Monthly 2022 vs 2023 vs 2024:

Industrial Energy Consumption

(For April 2024)

2,445T

BTU’s of Energy Consumed

-2.0% Tbtu (YOY)

This is a monthly indicator displaying the amount of Energy consumed in the Industrial sector in Trillions of btu (british thermal units)

1,623T

Fossil fuels

-2.7% Tbtu (YOY)

182T

Renewable Energy

+1.6% Tbtu (YOY)

277T

Electricity

-0.7% Tbtu (YOY)

363T

Electrical System Losses

-1.35% Tbtu (YOY)

672T

Petroleum

-3.8% Tbtu (YOY)

Monthly 2022 vs 2023 vs 2024:

Gas & Electricity Costs

(For April 2024)

$3.35

Natural Gas Prices (Dollars per thousand cubic feet)

-17.89% (YOY)

$7.82

Avg prices of electricity (Cents per Kilowatthour, Including taxes)

+4.26% (YOY)

Technology

The highlights from the “Manufacturing Alliance 2024 Digital Transformation Report” include:

  • Investment in Modernization: U.S. manufacturing continues to invest heavily in modernizing its factories and machinery. Investments have reached record highs, supported by government grants from the CHIPS and Science Act, with substantial funds allocated to major tech companies for operations in Arizona.
  • Digital Transformation Initiatives: Manufacturers are embracing digitalization to tackle supply chain disruptions, demand fluctuations, and talent shortages. Most have adopted or are implementing predictive analytics for supply chain planning and other digital tools to enhance operational efficiency.
  • Fragmented Progress: While there is significant movement towards digital transformation, progress remains siloed within organizations. Long-term digital transformation strategies often lack detailed business cases, leading to disconnected efforts.
  • Talent Challenges: There’s a continuous struggle with acquiring and retaining talent knowledgeable in emerging technologies. Manufacturers emphasize the importance of aligning product development with manufacturing processes to expedite innovation and maintain competitive advantage.
  • Strategic Roadmap and Business Case Issues: Many manufacturers report that their digital transformation strategies do not have a well-defined business case, particularly in areas like supply chain optimization, where actions are often reactionary rather than strategically planned.
  • Technology and Collaboration: Effective digital transformation requires robust collaboration across functions. Manufacturers are focusing on integrating digital technologies into every stage of production and have realized the importance of cross-functional collaboration to overcome the challenges of digital transformation.

 

This report highlights the varying degrees of digital transformation across the manufacturing sector, illustrating both the strides made and the significant challenges that remain, particularly in terms of strategic alignment and talent management.

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Sources:

  • Unemployment Rate: https://data.bls.gov/timeseries/LNU04032232?amp%253bdata_tool=XGtable&output_view=data&include_graphs=true
    • Petroleum & Coal: https://www.bls.gov/iag/tgs/iag324.htm
    • Chemical: https://www.bls.gov/iag/tgs/iag325.htm
    • Computer & Electronics: https://www.bls.gov/iag/tgs/iag334.htm
    • Electrical Equipment: https://www.bls.gov/iag/tgs/iag335.htm
    • Machinery: https://www.bls.gov/iag/tgs/iag333.htm
  • Industrial CO2 Emissions: https://www.eia.gov/totalenergy/data/monthly/pdf/sec11_7.pdf
  • Industrial Energy Consumption: https://www.eia.gov/totalenergy/data/monthly/pdf/sec2_11.pdf
  • Natural Gas Price: https://www.eia.gov/totalenergy/data/monthly/pdf/sec9_15.pdf
  • Electricity Price: https://www.eia.gov/totalenergy/data/monthly/pdf/sec9_11.pdf
  • Dry Van Spot Rates: https://www.dat.com/trendlines/van/national-rates
  • Flatbed Spot Rates: https://www.dat.com/trendlines/flatbed/national-rates
  • Dry Van Load to Truck: https://www.dat.com/trendlines/van/demand-and-capacity
  • Flatbed Load to Truck:  https://www.dat.com/trendlines/flatbed/demand-and-capacity
  • Project Fallout: https://www.industrialinfo.com/dash/gapMenu.jsp
  • Project Spending: https://www.industrialinfo.com/dash/industryMenu.jsp
  • Industrial Production and Capacity Utilization: https://www.federalreserve.gov/releases/g17/current/default.htm

© 2024 The Industrial Service Group