DE: Industrial Production

Fri Jan 09 01:00:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.3% -0.1% 0.2% 0.6%
Year over Year -0.6% -0.6% 0.8% 1.3%

Industrial production was weaker than expected in November but followed a stronger revised October reading that leaves intact a moderately rising trend. Output in November dipped a monthly 0.1 percent after a 0.6 percent increase at the start of the quarter to reduce annual growth from 1.3 percent to minus 0.6 percent, its weakest performance since August.

However, what was the first contraction in production in three months was largely attributable to the more volatile sectors. Hence, energy saw a hefty 2.4 percent decline versus October and construction was off 0.6 percent. Elsewhere the picture was rather healthier and within a 0.3 percent advance in manufacturing, capital goods rose 0.5 percent and consumer goods were up 0.6 percent. Intermediates were down but by just 0.1 percent.

The latest figures put average October/November industrial production 0.3 percent above its level in the third quarter when it dropped 0.3 percent. This is consistent with the manufacturing PMI surveys in calling for a modest increase in real GDP last quarter. November's manufacturing orders (minus 2.4 percent on the month) were disappointingly soft but probably due a reversal and in general the goods producing sector looks to be in reasonable shape at the start of the New Year.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are collected from companies in the sector with fifty or more employees and include the construction sector.

Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that will not lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios.

Like the manufacturing orders data, the production index has the advantage of being available in a timely manner giving a more current view of business activity. Those responding to the data collection survey account for about 80 percent of total industrial production. Like the PPI and the orders data, construction is excluded.

This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.