IT: Industrial Production

Fri Feb 09 03:00:00 CST 2018

Consensus Actual Previous Revised
Month over Month 0.8% 1.6% 0.0% 0.2%
Year over Year 4.9% 2.2% 2.3%

Goods production (ex-construction) was strong at year-end. A 1.6 percent monthly rise was double market expectations, the third increase in a row and the best performance by the sector since January 2016. Annual workday adjusted growth jumped fully 2.6 percentage points to 4.9 percent, its highest mark since last August.

December's monthly gain was led by capital goods which saw output surge 4.7 percent after a 0.2 percent drop in November. However, intermediates were also very robust, rising 2.6 percent and consumer goods (1.9 percent) were not far behind. Indeed, headline growth would have been stronger still but for a 1.5 percent contraction in energy.

The December report puts fourth quarter industrial production 0.8 percent above its level in the previous period when it expanded 1.6 percent versus April-June. The sector thus continued to provide an important boost to real GDP growth last quarter and business surveys suggest that the positive contribution extended into the current period. Indeed, the January PMI signalled the fastest growth of manufacturing output since February 2011.

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.