IT: Industrial Production

Tue Feb 10 03:00:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.1% 0.4% 0.3%
Year over Year -0.7% 0.1% -1.8% -1.9%

The goods producing sector had its best month in half a year in December. Excluding construction, output was up a surprisingly strong 0.4 percent versus November when it increased an unrevised 0.3 percent. Annual workday adjusted growth was 0.1 percent, up from minus 1.9 percent last time and its first positive print since June.

The year-end gain was led by the capital goods sector where output jumped fully 3.0 percent versus November. Intermediates were up a much more modest 0.3 percent but consumer goods dropped 0.9 percent. Energy production expanded 0.4 percent.

Prior to today's data expectations were for Friday's flash fourth quarter GDP estimate to show another quarterly contraction in total output (albeit just 0.1 percent). Despite January's firmer than expected outturn, this probably remains the case as industrial production in the fourth quarter was still 0.1 percent below its third quarter level.

Still, goods output has at least now seen its first back-to-back increase since September/October 2013 and the January manufacturing PMI was cautiously upbeat about production last month too. Euro weakness may yet prove to be the fillip needed to secure a sustainable recovery.

Industrial production measures the physical output of the nation's factories, mines and utilities. Approximately 4,300 companies provide data on more than 9,000 monthly flows of production.

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 PPI and the orders data, construction is excluded from the data. 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.