DE: Industrial Production

Wed Oct 07 01:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month -0.1% -1.2% 0.7% 1.2%
Year over Year 3.6% 2.5% 0.5% 0.9%

Industrial production was weaker than expected in August. A 1.2 percent monthly fall exactly reversed an upwardly revised gain in July but with base effects favourable, annual seasonally and workday adjusted growth was boosted from 0.9 percent to 2.5 percent.

The monthly headline decline reflected worryingly broad-based losses. Hence, capital goods output was down 2.1 percent, consumer goods 0.4 percent and intermediates were only flat. Energy decreased 1.4 percent and construction was off 1.3 percent.

Despite August's setback average industrial production in July/August was still 0.4 percent above its mean level in the second quarter. However, output will need to expand 0.5 percent in September for the third quarter just to match the previous period. As such, the likelihood is that goods production provided at best only a limited boost to real GDP in July-September which in turn increases the risk of a disappointingly sluggish increase in whole economy output.

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.