DE: Industrial Production

Mon Oct 09 01:00:00 CDT 2017

Consensus Actual Previous Revised
Month over Month 0.8% 2.6% 0.0% -0.1%
Year over Year 4.5% 4.0% 4.1%

The goods producing sector had a very good August. Output jumped a much sharper than expected 2.6 percent on the month and although July was shaded to show a 0.1 percent decline, annual growth still climbed from 4.1 percent to 4.5 percent, a 3-month high.

August's monthly surge was best the performance in more than six years and reflected impressive gains in output across all of the main subsectors bar the volatile construction category (minus 1.2 percent). Capital goods, which saw a 0.3 percent drop in July, led the way with a 4.8 percent spike while consumer goods increased 2.1 percent and intermediates 1.8 percent. Overall manufacturing advanced some 3.2 percent. Elsewhere, energy rose 1.7 percent.

Following declines in both June and July, August's hefty rebound puts industrial production firmly back on track and much more in keeping with recent bullish business surveys. Average output in the first two months of the quarter was 0.9 percent above its mean level in the second quarter when production expanded fully 1.9 percent versus the first quarter. With manufacturing orders up a hefty monthly 3.6 percent in August, the near-term outlook for the sector would seem particularly optimistic.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are collected from companies in the sector with fifty or more employees and include mining and quarrying, manufacturing, energy and, in contrast to its Eurozone counterpart, construction.

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 manufacturing orders data, the production index has the advantage of being available in a timely manner giving a more current view of business activity. Those responding to the data collection survey account for about 80 percent of total industrial production. Like the PPI and the orders data, construction is excluded.

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.