|Month over Month||0.5%||1.6%||-0.8%||-1.1%|
|Year over Year||0.1%||1.6%||-0.8%||-0.9%|
Excluding construction, industrial production rose 1.6 percent on the month in August. The increase was the largest since April 2013, followed a steeper revised 1.1 percent drop in July and was comfortably above market expectations. Annual growth of output was also 1.6 percent, up sharply from minus 0.9 percent last time.
In fact the headline data masked an even more robust performance by the key manufacturing sector where production climbed fully 2.2 percent versus the start of the quarter. Transport (6.5 percent) had a particularly good month as did pharmaceuticals (4.9 percent) and textiles (2.0 percent). With electronics and machines (1.2 percent) and other manufacturing (2.6 percent) also posting very solid advances, the only fall of any significance was in the volatile coke and refined petroleum products category (0.5 percent).
August's surprising buoyancy puts average industrial production in July/August on par with its second quarter mean. In the absence of an improbably large contraction in September, third quarter goods production will make a modest contribution to real GDP growth over the period.
Even so, manufacturing output in the last three months fell 0.4 percent and, of note, just yesterday the national central bank revised down its third quarter economic growth call from 0.3 percent to 0.2 percent. The recovery continues but at a disappointingly sluggish pace.
Industrial production measures the physical output of the nation's factories, mines and utilities. Manufacturing is seen as the best guide to underlying developments as some sectors can be very volatile and have a misleading impact on the total industrial production reading.
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 won't 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.
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