FR: Industrial Production

Tue Mar 10 02:45:00 CDT 2015

Consensus Actual Previous Revised
Month over Month -0.3% 0.4% 1.5% 1.4%
Year over Year 0.7% 0.6% -0.1% -0.4%

The goods producing sector was surprisingly robust in January. A 0.4 percent monthly rise in output was much stronger than expected and more than made up for a small downward revision to December's surge. Annual production growth climbed to 0.6 percent, its first reading above zero since July 2014.

However, the main positive contributions to the headline data came from the more volatile categories and these helped to mask a 0.1 percent monthly drop in the key manufacturing sector. Hence, mining and quarrying, energy and utilities posted a 2.6 percent monthly bounce and manufacturing itself would have seen a sharper contraction but for a 1.6 percent gain in coke and refined petroleum products.

That said, there were solid rises in transport equipment (1.8 percent) and food and drink (0.7 percent). Weakness was most apparent in electrical and electronic equipment (minus 1.3 percent) and in the other manufactured products subsector (minus 04 percent). Construction also fell 0.2 percent on the month.

The new figures put growth of both manufacturing output and industrial production over the latest three months at a modest 0.2 percent. However, January industrial production alone was fully 1.3 percent above its fourth quarter average when it fell 0.6 percent versus the July-September period. In line with December's report today's data are a good deal stronger than implied by the manufacturing PMI survey but make the national central bank's new (and downwardly revised) first quarter GDP growth forecast (0.3 percent) look much more plausible.

Industrial production measures the physical output of the nation's factories, mines and utilities. Manufacturing is seen as the best guide to underlying developments as some sectors can be very volatile and have a misleading impact on the total industrial production reading.

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 won't 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.