IT: Industrial Production

January 12, 2017 03:00 CST

Consensus Actual Previous Revised
Month over Month 0.3% 0.7% 0.0% 0.1%
Year over Year 2.0% 3.2% 1.3%

The goods producing sector had a solid and better than expected November. Excluding construction, output was up 0.7 percent on the month, its largest gain since August, after a marginally firmer revised 0.1 percent increase in October. Annual workday adjusted growth accelerated from 1.3 percent to 3.2 percent, also a 3-month high.

The monthly headline rise was led by intermediates which posted a 1.1 percent increase. Capital goods (0.8 percent) also performed well but consumer goods dropped 0.9 percent on the back of a 1.3 percent decline in non-durables. Energy production was up 2.4 percent.

November's advance puts output back at its highest level since July 2012. Average production in October/November was a healthy 0.9 percent above its third quarter mean and all but guarantees a positive contribution from the sector to fourth quarter real GDP growth. Nonetheless, such was the decline during the 2008/09 recession that even now factory output is still some 22 percent below its peak level in April 2008.

Industrial production measures the physical output of the nation's factories, mines and utilities. Construction is excluded. Approximately 4,100 companies provide data on more than 8,000 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.