|Month over Month||0.4%||-1.1%||-1.2%||-0.6%|
|Year over Year||1.2%||0.2%||2.5%||2.9%|
The goods producing sector was surprisingly weak in September. Although August's previously reported decline was halved to 0.6 percent, a 1.1 percent monthly slump at quarter-end left output well short of market expectations and means that production has now fallen in three of the last four months.
Weakness was relatively broad-based and there were monthly decreases in intermediates (0.4 percent), capital goods (1.4 percent) and, in particular, consumer goods (3.2 percent). Energy managed a 0.4 percent gain but construction was down 0.9 percent. As a result, manufacturing output posted a 1.4 percent contraction having already fallen 0.6 percent last time.
The latest data put third quarter industrial production 0.3 percent below its level in the second quarter when it expanded 0.2 percent. The first quarter saw a rise of 0.5 percent. To make matters worse, as yesterday's orders update made plain, incoming new business is also on the wane so the current quarter is unlikely to impress either.
As usual with the monthly production figures there is a chance that the September outturn will be revised up next month. However, as things currently stand the goods producing sector has lost significant momentum entering the new quarter and services will have to perform very well if GDP growth is just to match the 0.4 percent quarterly rate recorded in July-September.
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.