IT: Industrial Production

Fri Oct 09 03:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month -0.2% -0.5% 1.1%
Year over Year 1.4% 1.0% 2.7% 2.8%

The goods producing sector (ex-construction) contracted in August. A 0.5 percent monthly decline in output only partially dented an unrevised 1.1 percent rise in July but was still sharper than expected and the third decrease since March. Annual workday adjusted growth was 1.0 percent, down from 2.8 percent last time.

The monthly headline change was biased down by a hefty 4.3 percent slump in the energy subsector. However, underlying weakness was reflected in a 0.7 percent fall in consumer goods and a 0.4 percent slide in intermediates. Capital goods output was only flat.

That said, August's setback still leaves average production in July/August 0.5 percent above its second quarter mean and even a flat performance in September would yield a third quarter gain of 0.4 percent. To this end, the latest sector PMI showed manufacturing activity expanding last month but at its slowest pace in seven months. However, Istat's survey was more optimistic, finding confidence rising to its highest level since May 2011. Taken together the reports at least suggest a period of positive growth and a rising trend in output.

This is just as well since, as of August, industrial production was some 11 percent below its post-recession peak in April 2011 and a remarkable 24 percent short of its pre-recession high in April 2008.

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.