DE: Industrial Production

Mon Sep 07 01:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 1.2% 0.7% -1.4% -0.9%
Year over Year 0.8% 0.5% 0.6% 1.0%

Industrial production rose a smaller than expected 0.7 percent on the month in July but the shortfall was effectively made up by a positive revision to the June data which now show a 0.9 percent drop versus the previously reported 1.4 percent decline. Annual growth was 0.5 percent, down from 1.0 percent and the slowest since March.

Across the major production sectors performances were very mixed. Hence, a solid 2.8 percent monthly surge in capital goods and an even larger 3.2 percent bounce in construction contrasted sharply with a 3.7 percent slump in consumer goods and a 0.8 percent slide in basics. Energy output was up 1.9 percent.

July's partial rebound left goods production excluding construction just 0.1 percent above its average level in the second quarter when it rose 0.5 percent compared with the January-March period. Indeed, July was only 0.3 percent higher than last December indicating that the sector has done little more than stagnate over the year to date. However, manufacturing orders are trending firmer and the latest PMI survey (headline index 53.3) found incoming business robust in August.

Overall the third quarter has got off to an OK start and output looks likely to pick-up some momentum over coming months. That said, manufacturing has disappointed so far in 2015 and it remains to be seen whether or not promising survey results prove accurate or simply overly optimistic.

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.