FR: Industrial Production

Fri Dec 08 01:45:00 CST 2017

Consensus Actual Previous Revised
Month over Month -0.1% 1.9% 0.6% 0.8%
Year over Year 5.5% 3.2%

The goods producing sector had a bumper October. Excluding construction, output jumped fully 1.9 percent on the month, equalling its best outturn since March, and that after an upward revision to September. Annual growth was 5.5 percent, up from 3.2 percent last time and a 6-year peak.

In fact, the underlying performance was even better as manufacturing output climbed some 2.7 percent versus September when it rose a stronger revised 0.6 percent. Within this, electronics and machinery (6.1 percent) dominated but transport equipment (1.9 percent) and the other manufactured goods category (2.7 percent) also enjoyed a very robust period. Food and agriculture was flat while the volatile refining subsector (minus 3.4 percent) posted the only decline. Elsewhere, energy and extracted goods dropped 3.4 percent and construction was off 0.3 percent.

The latest figures put industrial production in October a more than healthy 2.3 percent above its average level in third quarter. Such an expansion rate is not sustainable but it looks as if goods production will make a very useful contribution to GDP growth this quarter.

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.