IT: Industrial Production

Thu May 10 03:00:00 CDT 2018

Consensus Actual Previous
Month over Month 0.4% 1.2% -0.5%
Year over Year 3.6% 2.5%

March industrial production (ex-construction) saw its best month so far in 2018. Even so, a surprisingly large 1.2 percent jump in output versus February only reversed a portion of the 2.2 percent decline recorded in the first two months of the year. Annual growth was 3.6 percent, up from 2.5 percent but still short of January's 4.4 percent.

The monthly headline bounce reflected rebounds in most of the major production categories following a poor mid-quarter. Hence, consumer goods climbed 2.5 percent after a 2.3 percent drop, capital goods gained 0.8 percent following a 1.2 percent decline and intermediates increased 0.7 percent after a 1.4 percent decrease. Energy was up a further 1.3 percent following a bad weather-inspired 8.3 percent surge last time.

The March data leave overall industrial production last quarter flat at its level in the fourth quarter when it rose a respectable 0.8 percent. Fortunately, the drag on GDP growth was offset by stronger activity in services and agriculture. Looking ahead, with the April PMI (53.5) falling to its weakest mark since January 2017 and within that, growth of new orders hitting an 18-month trough, there would seem to be only limited prospects of any significant pick-up in goods output this quarter.

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.