DE: Industrial Production

Thu Apr 09 01:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.2% 0.2% 0.6% -0.4%
Year over Year 0.7% -0.3% 0.8% -0.1%

Industrial production expanded 0.2 percent on the month in February, in line with expectations but only after a sharp downward revision to January which now shows output falling 0.4 percent as opposed to the previously reported 0.6 percent gain. Annual seasonally and workday adjusted growth fell from minus 0.1 percent to minus 0.3 percent, its slowest pace since November 2014.

February's modest monthly headline advance mainly reflected a 1.2 percent increase in capital goods output although intermediates (0.2 percent) as well as energy (1.2 percent) also made fresh progress. In fact manufacturing saw a respectable 0.5 percent rise despite a 0.3 percent reversal in consumer goods. However, construction was down a sizeable 3.1 percent.

Thanks to a strong end to 2014, the latest data put average industrial production in January/February 0.4 percent above the fourth quarter mean and so still suggest that the sector made a positive contribution to first quarter real GDP growth. Nonetheless, in line with the manufacturing orders figures released yesterday, production seems to be increasing at a rather more modest pace than suggested by some business surveys, notably the manufacturing PMIs. Economic growth last quarter may well undershoot more optimistic forecasts.

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.