IT: Industrial Production

Tue Mar 10 04:00:00 CDT 2015

Consensus Actual Previous
Month over Month 0.2% -0.7% 0.4%
Year over Year 0.0% -2.2% 0.1%

Hopes that the goods producing sector had finally started to turn the corner were not boosted by a surprise fall in output in January. A 0.7 percent monthly drop in (ex-construction) production was both the first and the steepest since September and, following an unrevised 0.4 percent increase in December, left workday adjusted output 2.2 percent below its level a year ago.

Overall output was hit by a hefty monthly decrease in capital goods (1.8 percent) but intermediates also dipped 0.2 percent. Consumer goods posted a minimal 0.1 percent gain and energy was up 0.5 percent.

With production over the three months to January just 0.1 percent above the previous period the trend in output looks to be little better than flat. Indeed, January alone was 0.3 percent below its fourth quarter average. However, the Istat survey pointed to a significant improvement in manufacturing sentiment in February and the PMI report found the strongest increase in output since last June.

As such disappointment with the January data may be only temporary. That said, industrial production will now struggle to provide any real help to real GDP growth this quarter.

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.