FR: Industrial Production

Fri Jun 08 01:45:00 CDT 2018

Consensus Actual Previous Revised
Month over Month 0.3% -0.5% -0.4%
Year over Year 2.1% 1.8% 1.9%

Goods production (ex-construction) was disappointingly soft in April. A 0.5 percent monthly decline compounded March's unrevised 0.4 percent drop and constituted the third fall in the last four months. Annual growth was 2.1 percent, up from 1.9 percent last time but only due to an even sharper setback in April 2017.

However, the poor headline masked a second successive rise in manufacturing where output rose 0.4 percent following a stronger revised 0.3 percent gain last time. Nonetheless, even here it was very mixed picture with a 3.6 percent jump in transportation and 1.8 percent spurt in food and drink contrasting with a 2.5 percent slump in machinery and equipment. Other manufacturing was up just 0.1 percent while the erratic coke and refined petroleum products category was down 4.7 percent. Elsewhere, construction rebounded 2.9 percent after a 2.3 percent nosedive in March.

The monthly production report is volatile but on a more useful 3-monthly comparison, overall industrial production was down 0.5 percent and the key manufacturing sector off 1.1 percent. In April alone, the former was 0.4 percent below its first quarter average and but the latter 0.5 percent firmer. Consequently, the second quarter may not be quite as poor as a superficial look at the April figures might suggest but the chances are that any growth will still be quite modest.

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.