IT: Industrial Production

Fri Jan 12 03:00:00 CST 2018

Consensus Actual Previous Revised
Month over Month 0.6% 0.0% 0.5% 0.6%
Year over Year 3.3% 2.2% 3.1% 3.0%

November was a disappointing period for the goods producing sector. Excluding construction, output was only flat on the month, short of expectations and soft enough to reduce annual workday adjusted growth from 3.0 percent to 2.2 percent. This was its second worst performance since April.

Production was held in check by the consumer goods subsector which recorded a 0.7 percent monthly decline (non-durables minus 1.0 percent) following minimal gains of 0.1 percent in both September and October. With a fall of 0.3 percent, capital goods were not much better and intermediates were up only 0.1 percent. Consequently, that monthly growth held above minus figures was largely due to the volatile energy sector where output jumped 4.0 percent.

The latest report puts average production in the first two months of the quarter unchanged from its mean level in the third quarter when it rose a solid 1.3 percent versus April-June. According to the sector PMI survey (57.4), output growth reached a record high in December so it may be that the year ended on a much brighter note. The same survey was also very optimistic about new order flows which bodes well for the start of 2018. That said, the PMI has tended to overestimate the pick-up in goods production in recent months. The trend is most certainly up but there still looks to be a sizeable performance gap with the core Eurozone member states.

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.