FR: Industrial Production

May 10, 2017 01:45 CDT

Consensus Actual Previous Revised
Month over Month 1.0% 2.0% -1.6% -1.7%
Year over Year 2.1% -0.7%

Industrial production (ex-construction) rebounded well in March. Following a marginally steeper revised 1.7 percent monthly fall in February, output expanded a solid 2.0 percent, its strongest advance since last November. Annual growth was 2.1 percent, up from minus 0.7 percent last time.

Promisingly, the good news in the headline monthly change was attributable to manufacturing which saw production rise fully 2.5 percent. Within this, transport equipment (5.2 percent) and machinery and equipment (4.8 percent) were especially robust and the other manufacturing category (1.8 percent) similarly had a good month. Food was also 0.8 percent firmer but coke and petroleum products were down 3.2 percent and mining and quarrying, energy, water supply and waste management off 1.6 percent. Elsewhere, construction slumped 5.1 percent although even this failed to reverse February's 5.4 percent surge.

However, earlier weakness meant that first quarter industrial production was still 0.5 percent below its fourth quarter level while manufacturing dipped 0.3 percent. Still, the March recovery puts output more in line with the improvement shown in the sector PMI survey and the same report signalled a further, more marked, increase in April. The second quarter should look quite respectable.

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.