|Month over Month||0.4%||-0.5%||0.2%||0.0%|
|Year over Year||0.4%||-0.1%||-0.3%||0.1%|
Industrial production was surprisingly soft in March. A 0.5 percent monthly drop was the steepest since last August and followed a downwardly revised flat performance in February. As a result, calendar and seasonally adjusted annual growth slipped from 0.1 percent to minus 0.1 percent, its worst showing since November 2014.
The underlying deterioration was actually even more marked as manufacturing output was down fully 0.8 percent versus February when it was up a revised 0.1 percent. Weakness was most apparent in the key capital goods subsector which posted a monthly 1.4 percent contraction. Intermediates were not far behind with a 0.8 percent decrease but consumer goods advanced 0.7 percent. Energy was unchanged on the month but overall production found support in a 2.1 percent increase in construction.
Despite March's setback first quarter total goods production still rose 0.5 percent versus the fourth quarter when it gained 0.8 percent. Even so, manufacturing output during the same period edged up just 0.1 percent, some 0.7 percentage points short of its October-December rate. As such today's figures are really quite disappointing and without a major contribution from (an admittedly much stronger) service sector, real GDP last quarter will have struggled to get close to the fourth quarter's 0.7 percent rise.
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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