IT: Industrial Production

Fri Dec 11 03:00:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.2% 0.5% 0.2%
Year over Year 2.0% 2.9% 1.7% 1.8%

Industrial production (ex-construction) outperformed expectations in October. A 0.5 percent monthly increase followed an unrevised 0.2 percent gain in September to boost annual workday adjusted growth from 1.8 percent to 2.9 percent. This was the first monthly back-to-back rise in output since February/March.

Overall production was lifted by broad-based gains amongst the major sub-sectors. Hence, consumer goods posted a 1.4 percent advance, intermediates rose 0.9 percent and capital goods expanded 0.6 percent. Indeed, headline growth would have been stronger but for a 0.7 percent drop in energy.

The October data mean that overall production at the start of the current quarter was 0.5 percent above its average level in the third quarter when it grew 0.4 percent. The monthly statistics are still volatile but the signs are that the recovery in manufacturing is gradually gaining traction and, if the sector PMI is anything to go by, output in November saw its strongest increase since July.

The third quarter economy disappointed with real GDP expanding just 0.2 percent but the fourth quarter is starting to shape up rather better.

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.