FR: Industrial Production

April 7, 2017 01:45 CDT

Consensus Actual Previous Revised
Month over Month 0.5% -1.6% -0.3% -0.2%
Year over Year -0.7% 1.0% -0.2%

Excluding construction, industrial production fell a surprisingly steep 1.6 percent on the month in February, its third decline in as many months. Annual growth dropped to minus 0.7 percent from minus 0.2 percent, a 4-month low.

The headline data were hit by a volatile refining subsector and output here was down fully 4.8 percent on the month. However, most areas were unexpectedly weak and there were falls too in machinery and equipment (1.7 percent), transport equipment (2.3 percent) and the other manufactured goods category (0.2 percent). Only food and drink (0.9) managed to increase production during the month. Elsewhere there was also a 7.9 percent slump in mining and quarrying, energy, water supply and waste management.

Average industrial production in January/February was nearly a full percentage point short of its mean level in the fourth quarter. Without an improbably large increase in March the sector will have subtracted from first quarter real GDP growth. This would be at odds with the PMI surveys which have suggested a marked improvement over the period.

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.