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INDUSTRIAL UPDATE

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Industrial Production & Capacity Utilization

In August, industrial production rose 0.8 percent after falling 0.9 percent in July. Similarly, the output of manufacturing increased 0.9 percent in August after decreasing 0.7 percent during the previous month. This pattern was due in part to a recovery in the index of motor vehicles and parts, which jumped nearly 10 percent in August after dropping roughly 9 percent in July. The index for manufacturing excluding motor vehicles and parts moved up 0.3 percent in August. The index for mining climbed 0.8 percent, while the index for utilities was flat. At 103.1 percent of its 2017 average, total industrial production in August was the same as its year-earlier level. Capacity utilization moved up to 78.0 percent in August, a rate that is 1.7 percentage points below its long-run (1972–2023) average.

Industrial Production Index

(For August 2024)

103.1

Total Industrial Production Index

-0.39% (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.

99.6

Manufacturing

+0.2% (YOY)

120.1

Mining

+0.1% (YOY)

94.4

Business Equipment

-1.4% (YOY)

105.7

Materials

+0.3% (YOY)

101.2

Construction

+0.9% (YOY)

Monthly 2022 vs 2023 vs 2024:

Capacity Utilization

(For August 2024)

78.0

Total Capacity Utilization Index

-1.14% (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)

90.0

Mining

-0.5% (YOY)

Monthly 2022 vs 2023 vs 2024:

Industrial Labor

The U.S. labor market showed signs of resilience in August, according to the latest data from the Bureau of Labor Statistics. Despite earlier uncertainties, the economy added 42,000 jobs, significantly below the 160,000 that had been predicted but still marking an improvement from the previous months. The unemployment rate improved slightly, decreasing to 4.2%.

This month’s report highlights a modest increase in average hourly earnings, which rose by 0.4% month-over-month and 3.8% year-over-year, suggesting that while the pace of hiring may have slowed, wage growth remains strong. Additionally, the average workweek extended, indicating that not only are more people working, but they are also working more hours.

The Engineering and Construction sectors emerged as strong performers, adding a combined total of 34,800 jobs, with the unemployment rate in these industries dropping to 3.5%. This growth contrasts with the Manufacturing sector, which saw a reduction of 24,000 jobs.

Overall, the August jobs report provides a mixed yet hopeful view of the labor market, reflecting both ongoing economic challenges and areas of growth.

Manufacturing Sector Unemployment Rates

(For August 2024)

3.5%

Manufacturing Unemployment Rate

+29.6% (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.

3.4%

Machinery

+36.0% (YOY)

3.3%

Chemical

+94.1% (YOY)

3.9%

Petroleum & Coal

-18.7% (YOY)

5.4%

Electrical Equipment

+68.7% (YOY)

1.8%

Computer & Electronics

-30.7% (YOY)

3.7%

Food

-2.6% (YOY)

Monthly 2022 vs 2023 vs 2024:

Manufacturing Sector PPI

(For August 2024)

249.3

Manufacturing Producer Price Index

-0.6% (YOY)

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

185.1

Machinery

+3.1% (YOY)

356.0

Chemical

+1.1% (YOY)

337.7

Petroleum & Coal

-15.3% (YOY)

202.5

Electrical Equipment

+2.2% (YOY)

101.4

Computer & Electronics

+2.0% (YOY)

259.5

Food

+1.9% (YOY)

185.0

Paper

+1.2% (YOY)

Monthly 2022 vs 2023 vs 2024:

Shipping

Load-to-Truck Ratio:

  • The Load-to-Truck Ratio (LTR) saw varied trends throughout August. Starting with a small boost in early August, load posts declined mid-month by 13% year-over-year and continued to decrease towards the end of August by 9% from the previous year, reflecting a calmer period likely influenced by the Canadian rail strike and other market disruptions.
  • Despite these fluctuations, the dry van LTR concluded the month at 3.40, maintaining a level 2% above the long-term average for this period, signaling a resilient yet adjusting freight market.

Looking Ahead: Flatbed Freight Carriers

  • The flatbed segment anticipates growth, spurred by expansive developments in the data center sector. The U.S. data center space expanded by 26% last year, with a record amount still under construction.
  • This construction boom, highlighted by the rapid global expansion of data centers as noted by Amazon Web Services’ VP of Engineering Bill Vass, predicts sustained demand for flatbed freight carriers. With each new data center taking one to two years to complete, the requirement for truckload carriers is expected to extend well into 2025, presenting ample opportunities for the flatbed sector to capitalize on this trend.

(For August 2024)

$2.01

Dry Van Spot Rates

-4.7% (YOY)

$2.40

Flatbed Spot Rates

-4.3% (YOY)

3.64

Dry Van Load-To-Truck Ratio

+28.6% (YOY)

9.84

Flatbed Load-To-Truck Ratio

+19.4% (YOY)

Environmental / Sustainability

Fossil Fuels and Renewable Energy:

  • Coal Consumption and Production: Coal consumption in the U.S. has continued to decrease due to a shift towards renewable energy sources and environmental policies discouraging coal use. Electricity generation from coal has also fallen.
  • Petroleum and Natural Gas: While U.S. crude oil production peaked in late 2023, petroleum product supply has increased slightly in 2024. Natural gas saw a temporary peak in consumption in early 2024 due to cold weather but is expected to stabilize.
  • Renewable Energy Growth: Renewable energy sources, particularly solar and wind, have shown significant increases in electricity generation capacity, contributing to a reduction in the use of fossil fuels for electricity.

Electricity:

  • Shift in Generation Sources: There is an ongoing shift from coal to natural gas and renewables in electricity generation. This transition is driven by lower natural gas prices and increasing renewable capacity.
  • Electricity Prices: Electricity prices have varied, influenced by changes in the generation mix and fuel prices.

Petroleum:

  • Market Fluctuations: The petroleum market has experienced fluctuations, influenced by global economic conditions and geopolitical tensions.
  • Production and Consumption: U.S. petroleum production has remained stable, with slight increases in product supply due to higher demand in certain sectors.

Natural Gas:

  • Consumption Patterns: Natural gas consumption saw a significant but temporary increase during the colder months of early 2024, expected to return to normal levels as the weather warms.
  • Supply Issues: Temporary disruptions in natural gas supply were noted, primarily due to extreme weather conditions, but these are expected to resolve without long-term impacts.

Crude Oil:

  • Production Stability: After a peak in late 2023, crude oil production has slightly declined but is expected to stabilize without significant changes throughout 2024.
  • Import and Export Trends: The U.S. continues to adjust its balance of crude oil imports and exports in response to global oil market dynamics and domestic production changes.

Coal:

  • Continued Decline: The U.S. coal industry continues to shrink, with reductions in both production and consumption. The decline is aligned with the global trend of moving away from coal to more sustainable energy sources.

Industrial CO2 Emissions

(For May 2024)

108M

Metric Tons of CO2 Emitted

0.0% (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

Natural Gas

0.0% (YOY)

28M

Petroleum

-3.7% (YOY)

29M

Pharma & Biotech

-3.3% (YOY)

Monthly 2022 vs 2023 vs 2024:

Industrial Energy Consumption

(For May 2024)

2,596T

BTU’s of Energy Consumed

+0.03% Tbtu (YOY)

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

1,691T

Fossil fuels

+0.05% Tbtu (YOY)

190T

Renewable Energy

-0.5% Tbtu (YOY)

296T

Electricity

+0.3% Tbtu (YOY)

419T

Electrical System Losses

0.0% Tbtu (YOY)

744T

Petroleum

+0.5% Tbtu (YOY)

Monthly 2022 vs 2023 vs 2024:

Gas & Electricity Costs

(For May 2024)

$3.10

Natural Gas Prices (Dollars per thousand cubic feet)

-13.6% (YOY)

$7.95

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

+4.33% (YOY)

Technology & Cyber Security

We have data coming soon, but in the meantime, he are some highlights from technology reports:

  • 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.

Safety

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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
  • Manufacturing Alliance Report 2024: Manufacturing-Alliance-2024-Digital-Transformation-Report.pdf

© 2024 The Industrial Service Group