Forest Industry Performance: November 2015

Forest industry performance in October and November was reported by both the US government and the Institute for Supply Management.

Total industrial production (IP) declined 0.2% for a second month in October (+0.3% YoY); meanwhile, the index for manufacturing moved up 0.4% (+1.9% YoY). Total IP for 3Q was upwardly revised to an annual rate of 2.6% instead of the previously reported +1.8%. Other October details were also positive: Wood Products output jumped 1.9% (-0.4% YoY) while Paper edged up 0.1% (-0.9% YoY).

Capacity utilization (CU) for the industrial sector fell 0.3% in October (to 77.5%), a rate that is 2.6 percentage points below its long-run (1972-2014) average.

• Wood Products CU rose 1.7%   (-2.8% YoY) to 69.9%

• Paper inched up 0.1% (-0.5% YoY) to 82.6%

Capacity at the all-industries and manufacturing levels moved higher:

• All-industries: +0.1% (+1.5% YoY) to 138.3% of 2012 output

• Manufacturing: +0.1% (+1.3% YoY) to 138.9%

• Wood Products: +0.2% (+2.5% YoY) to 160.1%

• Paper was unchanged (-0.4% YoY) at 116.9%

The Institute for Supply Management’s (ISM) monthly opinion survey showed that U.S. manufacturing contracted during November for the first time in 36 months (Figure 2). The PMI fell 1.5 percentage points, to 48.6%—the lowest reading since June 2009. (50% is the breakpoint between contraction and expansion.) About the only positive aspect of the survey was an increase in employment (Table 3), although shrinking manufacturer inventories could conceivably be considered positive, too. Both Wood Products and Paper Products were unchanged in November; in fact, Wood Products was not even mentioned in the report. For Paper Products, employment growth was apparently offset by declines in new and backlogged domestic orders, and new export orders.

The pace of growth in the non-manufacturing sector slowed in November; the NMI dropped 3.2 percentage points, to 59.1%. Important internals weakened essentially across the board, but remained in expansion. Real Estate and Construction reported increases in activity, whereas Ag & Forestry was unchanged.