FR: Industrial Production

January 10, 2017 01:45 CST

Consensus Actual Previous Revised
Month over Month 0.6% 2.2% -0.2% -0.1%
Year over Year 1.8% -1.8% -1.8%

Industrial production (ex-construction) saw positive growth in November for the first time since August. In fact, a 2.2 percent monthly increase after a minimally smaller revised 0.1 percent October drop was much stronger than expected and the second sharpest since December 2014. As a result, the yearly change in output climbed from minus 1.8 percent to 1.8 percent, its best treading since April.

Manufacturing performed even better with a 2.3 percent monthly spurt that reflected gains in nearly all of its major subsectors. Amongst these, transport equipment (3.4 percent, refining (6.3 percent) and other manufactured goods (3.0 percent) performed especially well. Food and agriculture also expanded 1.3 percent. Elsewhere, energy and extracted goods advanced 1.5 percent but construction dipped 0.3 percent (after a 2.0 percent bounce last time).

The latest data put average industrial production so far this quarter 0.8 percent above its mean level in the previous quarter when it was only flat. The national central bank is still forecasting fourth quarter real GDP growth of 0.4 percent; today's report makes this figure look all the more achievable.

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 cause misleadingly large short-term swings in total industrial 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 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.