IT: Industrial Production

Tue Oct 10 03:00:00 CDT 2017

Consensus Actual Previous Revised
Month over Month 0.2% 1.2% 0.1%
Year over Year 5.7% 4.4% 4.6%

Excluding construction, industrial production rose a very solid 1.2 percent in the month in August following an unrevised 0.1 percent gain in July. This was its second sharpest increase so far in 2018 as well as the fourth increase in as many months and saw annual workday adjusted growth climb from 4.6 percent to 5.7 percent, its strongest print since December 2016.

Capital goods, which advanced 2.2 percent, and intermediates (2.4 percent) did most to boost the overall monthly change but energy (4.6 percent) also had a positive effect. By contrast, consumer goods (minus 0.5 percent) recorded their first contraction since April although annual growth (6.8 percent) actually accelerated.

The August data are in line with the recent improvement in sentiment found in recent business surveys and the same reports pointed to further gains in September. As it is, average industrial production in July/August was fully 1.8 percent above its mean level in the second quarter when its increased 1.3 percent versus the first three months of the year. The recovery in goods production would appear to be increasingly well entrenched. However, a meaningful acceleration in real GDP growth will require a better performance from services which continue to lag significantly.

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.