IT: Industrial Production

Wed Aug 09 03:00:00 CDT 2017

Consensus Actual Previous Revised
Month over Month 0.1% 1.1% 0.7%
Year over Year 5.3% 2.8% 2.7%

Industrial production (excluding construction) continued to expand at a healthy pace in June. Following an unrevised 0.7 percent monthly rise in May, output increased a further 1.1 percent, its strongest performance since last December. Annual workday adjusted growth climbed from 2.7 percent to 5.3 percent, also its best reading so far in 2017.

June's bounce was based upon solid gains in consumer goods and intermediates, both up 1.3 percent versus May. Energy (5.7 percent) similarly provided an important lift. However, capital goods dropped 0.3 percent although this was after a 2.2 percent spurt in mid-quarter.

June was the fourth month out of the last five in which industrial production has registered positive monthly growth. As a result, second quarter output rose 1.1 percent from its level in the first quarter when it fell 0.2 percent. The upswing is consistent with what has been a sharp improvement in the manufacturing PMI and the same survey pointed to a good start to the current quarter too. Even so, inflationary pressures in the sector remain becalmed and growth of demand will need to expand sustainably more to accommodate any significant rise in prices.

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.