JP: Industrial Production

September 29, 2016 06:50 CDT

Consensus Actual Previous
Month over Month 0.5% 1.5% 0.0%
Year over Year 1.2% -0.5%

August industrial output grew at its fastest pace in more than two years. Output was up 1.5 percent on the month and 1.2 percent from a year ago. In July, output declined 0.4 percent. These data are particularly volatile.

Among the industries that increased in August were electronic parts and devices (up 6.3 percent), information and communication electronics equipment (up 14.0 percent) and chemicals excluding drugs (up 3.6 percent). Transport equipment (down 1.7 percent), petroleum and coal products (down 1.6 percent) and fabricated metals (down 0.7 percent) all declined on the month.

According to the September survey, output is expected to increase 2.2 percent and 1.2 percent in October.

Industrial Production measures the physical output of the nation's factories, mines and utilities. Factories manufacture various products, and the industrial production indexes have been prepared as a comprehensive indicator of wide-ranging production activities for such products and are regarded as some of the most important among economic indexes.

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.

Industrial production provides key industry data for this export-dependent economy. The data are issued twice a month-a preliminary estimate at the end of the month for the preceding month and a revised estimate about two weeks later. All products, whether sold domestically or abroad, are included in the calculation of industrial production. Industrial production is highly sensitive to the business cycle and can often predict future changes in employment, earnings and income. For these reasons industrial production is considered a reliable leading indicator that conveys information about the overall health of the economy. 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.