IT: Industrial Production

Tue Nov 10 03:00:00 CST 2015

Consensus Actual Previous
Month over Month 0.6% 0.2% -0.5%
Year over Year 1.4% 1.7% 1.0%

Excluding construction, industrial production expanded a disappointingly small 0.2 percent on the month in September. The increase failed to reverse August's unrevised 0.5 percent drop but suggests a modest underlying uptrend in output that looks likely to be sustained this quarter. Annual workday adjusted growth was 1.7 percent, a rise of 0.7 percentage points versus last time but still more than a full percentage point short of its July rate.

September's modest monthly advance came courtesy of a 0.7 percent gain intermediates. Elsewhere the news was generally poor. Hence, despite a 1.2 percent jump in non-durables, overall consumer goods saw a 1.0 percent decline while capital goods were only flat and energy dropped 1.5 percent.

The latest data put third quarter production (ex-construction) 0.4 percent above its level in the second quarter when it expanded a marginally stronger 0.5 percent. Both the PMI and Istat surveys indicated some pick-up in activity rates to start the new quarter but for now monthly output remains very volatile. A sustained run of gains will be needed if the sector is to provide real GDP growth with any meaningful help through year-end.

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.