IT: Industrial Production

April 10, 2017 03:00 CDT

Consensus Actual Previous Revised
Month over Month 1.5% 1.0% -2.3%
Year over Year 1.9% -0.5% -0.2%

February industrial production (ex-construction) staged only a partial rebound from its January slump. A 1.0 percent monthly rise followed an unrevised 2.3 percent drop at the start of the year and lifted annual workday adjusted growth from minus 0.2 percent to 1.9 percent.

The recovery was led by the intermediates and capital goods sectors where output was up a monthly 2.2 percent and 2.9 percent respectively. However, consumer goods posted a 0.2 percent dip and energy, which dropped fully 6.2 percent, also had a negative impact. Overall manufacturing saw a 1.4 percent advance.

If the manufacturing sector PMI survey is to be believed, production expanded at its fastest rate in March since December 2015 so the quarter probably ended on at least a reasonably upbeat note. However, this would be just as well as average output in January/February was 0.6 percent short of its mean level in the fourth quarter and a 1.4 percent spurt in March will be needed just to keep the first quarter flat. Accordingly, without some significant revisions, it looks as it goods production will provide, at best, only a very limited boost to first quarter real GDP growth.

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.