|Month over Month||0.5%||0.1%||-0.1%||0.1%|
|Year over Year||-0.2%||-0.4%||-0.6%||-0.4%|
Industrial production was disappointingly soft in December. A minimal 0.1 percent monthly rise matched an upwardly revised gain posted in November to leave annual output growth unchanged at minus 0.4 percent.
However, the underlying picture was somewhat brighter as the headline data were hit by a 2.9 percent monthly decline in construction. Hence, manufacturing output expanded a respectable 0.5 percent after a 0.4 percent advance last time courtesy of solid increases in both intermediates (2.0 percent) and consumer goods (1.4 percent). Even so, capital goods production fell 1.2 percent and so easily more than reversed November's 0.5 percent gain. Energy expanded 0.8 percent.
The December release means that fourth quarter industrial production rose 0.5 percent versus the third quarter when it subtracted from real GDP growth with a 0.3 percent drop. Over the same period manufacturing was also up 0.5 percent. Whole economy output growth was probably still quite sluggish in the fourth quarter but at least the resurgence in December manufacturing orders reported yesterday holds out the promise of a more positive impact from the goods producing sector at the start of 2015.
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.
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