| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Industrial Production - M/M | 0.0% | -0.2% to 0.5% | 0.3% | 0.4% | 0% |
| Capacity Utilization Rate | 79.6% | 79.2% to 79.9% | 79.7% | 79.7% | 79.5% |
| Manufacturing Output - M/M | -0.1% | -0.2% to 0.3% | 0.4% | 0.1% | -0.1% |
Highlights
Industrial production is up 0.3 percent in September after a downward revision to unchanged in August. Production rose more than expected in September with the Econoday survey consensus at 0.0 percent or unchanged. The increase is due to rise in production in manufacturing and mining that are partially offset by a decline in utilities output.
Manufacturing production is up 0.4 percent in September after a 0.1 percent decline in August. Durables production is up 0.4 percent and nondurables is up 0.3 percent. Among durables, production of motor vehicles and parts is up 0.3 percent in September. Excluding motor vehicles, manufacturing production is up 0.4 percent in September.
Mining production is also up 0.4 percent in September. Oil and gas well drilling is up 1.2 percent in September. Utilities production is down 0.3 percent in September, reflecting generally much cooler weather across the US. Production of electricity is down 0.3 percent and natural gas is down 0.5 percent.
Capacity utilization is up 2 tenths to 79.7 percent in September from 79.5 percent in August and matches the 1972-2022 average of 79.7 percent. Manufacturing capacity use is about unchanged at 77.8 percent in September from 77.7 in August and is below the 1972-2022 average of 78.2 percent. Mining capacity use is up to 95.1 percent in September from 94.6 percent in August and is well above the 1972-2022 average of 86.4 percent. Utilities capacity is down to 72.7 percent in September from 73.1 percent in the prior month and is below the 1972-2022 average of 84.7 percent.
Today's results put the Relative Performance Index at plus 13 to indicate that US data, on net, are modestly exceeding expectations.
Manufacturing production is up 0.4 percent in September after a 0.1 percent decline in August. Durables production is up 0.4 percent and nondurables is up 0.3 percent. Among durables, production of motor vehicles and parts is up 0.3 percent in September. Excluding motor vehicles, manufacturing production is up 0.4 percent in September.
Mining production is also up 0.4 percent in September. Oil and gas well drilling is up 1.2 percent in September. Utilities production is down 0.3 percent in September, reflecting generally much cooler weather across the US. Production of electricity is down 0.3 percent and natural gas is down 0.5 percent.
Capacity utilization is up 2 tenths to 79.7 percent in September from 79.5 percent in August and matches the 1972-2022 average of 79.7 percent. Manufacturing capacity use is about unchanged at 77.8 percent in September from 77.7 in August and is below the 1972-2022 average of 78.2 percent. Mining capacity use is up to 95.1 percent in September from 94.6 percent in August and is well above the 1972-2022 average of 86.4 percent. Utilities capacity is down to 72.7 percent in September from 73.1 percent in the prior month and is below the 1972-2022 average of 84.7 percent.
Today's results put the Relative Performance Index at plus 13 to indicate that US data, on net, are modestly exceeding expectations.
Market Consensus Before Announcement
After rising 0.4 percent in August, industrial production is expected to slow to no change in September. Manufacturing output is expected to fall 0.1 percent. Capacity utilization is expected to edge lower to 79.6 percent following August's higher-than-expected 79.7 percent rate.
Definition
The Federal Reserve's monthly index of industrial production and the related capacity indexes and capacity utilization rates cover manufacturing, mining, and electric and gas utilities. The industrial sector, together with construction, accounts for the bulk of the variation in national output over the course of the business cycle. The production index measures real output and is expressed as a percentage of real output in a base year, currently 2012. The capacity index, which is an estimate of sustainable potential output, is also expressed as a percentage of actual output in 2012. The rate of capacity utilization equals the seasonally adjusted output index expressed as a percentage of the related capacity index.
The index of industrial production is available nationally by market and industry groupings. The major groupings are comprised of final products (such as consumer goods, business equipment and construction supplies), intermediate products and materials. The industry groupings are manufacturing (further subdivided into durable and nondurable goods), mining and utilities. The capacity utilization rate -- reflecting the resource utilization of the nation's output facilities -- is available for the same market and industry groupings.
Industrial production was also revised to NAICS (North American Industry Classification System) in the early 2000s. Unlike other economic series that lost much historical data prior to 1992, the Federal Reserve Board was able to reconstruct historical data that go back more than 30 years.
The index of industrial production is available nationally by market and industry groupings. The major groupings are comprised of final products (such as consumer goods, business equipment and construction supplies), intermediate products and materials. The industry groupings are manufacturing (further subdivided into durable and nondurable goods), mining and utilities. The capacity utilization rate -- reflecting the resource utilization of the nation's output facilities -- is available for the same market and industry groupings.
Industrial production was also revised to NAICS (North American Industry Classification System) in the early 2000s. Unlike other economic series that lost much historical data prior to 1992, the Federal Reserve Board was able to reconstruct historical data that go back more than 30 years.
Description
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.
The index of industrial production shows how much factories, mines and utilities are producing. The manufacturing sector accounts for less than 20 percent of the economy, but most of its cyclical variation. Consequently, 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.
The capacity utilization rate provides an estimate of how much factory capacity is in use. If the utilization rate gets too high (above 85 percent), it can lead to inflationary bottlenecks in production. The Federal Reserve watches this report closely and sets interest rate policy on the basis of whether production constraints are threatening to cause inflationary pressures. As such, the bond market can be highly sensitive to changes in the capacity utilization rate. In this global environment, though, global capacity constraints may matter as much as domestic capacity constraints.
Importance
Industrial production and capacity utilization indicate not only trends in the manufacturing sector, but also whether resource utilization is strained enough to forebode inflation. Also, industrial production is an important measure of current output for the economy and helps to define turning points in the business cycle (start of recession and start of recovery).
Interpretation
The bond market will rally with slower production and a lower utilization rate. Bond prices will fall when production is robust and the capacity utilization rate suggests supply bottlenecks. Healthy production growth is bullish for the stock market only if it isn't accompanied by indications of inflationary pressures.
The production of services may have gained prominence in the United States, but the production of manufactured goods remains a key to the economic business cycle. A nation's strength is judged by its ability to produce domestically those goods demanded by its residents as well as by importers. Many services are necessities of daily life and would be purchased whether economic conditions were weak or strong. Consumer durable goods and capital equipment are more likely purchased when the economy is robust. Production of manufactured goods causes volatility in the economy. When demand for manufactured goods decreases, it leads to less production with corresponding declines in employment and income.
The three most significant sectors include motor vehicles and parts, aircraft and information technology. Volatility in any these single sectors could affect the total.
Industrial production is subject to some monthly variation. As with all economic statistics, the three-month moving average of the monthly changes or year over year percent changes provide a clearer picture of the trend in this series.
The index of industrial production shows how much factories, mines and utilities are producing. The manufacturing sector accounts for less than 20 percent of the economy, but most of its cyclical variation. Consequently, 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.
The capacity utilization rate provides an estimate of how much factory capacity is in use. If the utilization rate gets too high (above 85 percent), it can lead to inflationary bottlenecks in production. The Federal Reserve watches this report closely and sets interest rate policy on the basis of whether production constraints are threatening to cause inflationary pressures. As such, the bond market can be highly sensitive to changes in the capacity utilization rate. In this global environment, though, global capacity constraints may matter as much as domestic capacity constraints.
Importance
Industrial production and capacity utilization indicate not only trends in the manufacturing sector, but also whether resource utilization is strained enough to forebode inflation. Also, industrial production is an important measure of current output for the economy and helps to define turning points in the business cycle (start of recession and start of recovery).
Interpretation
The bond market will rally with slower production and a lower utilization rate. Bond prices will fall when production is robust and the capacity utilization rate suggests supply bottlenecks. Healthy production growth is bullish for the stock market only if it isn't accompanied by indications of inflationary pressures.
The production of services may have gained prominence in the United States, but the production of manufactured goods remains a key to the economic business cycle. A nation's strength is judged by its ability to produce domestically those goods demanded by its residents as well as by importers. Many services are necessities of daily life and would be purchased whether economic conditions were weak or strong. Consumer durable goods and capital equipment are more likely purchased when the economy is robust. Production of manufactured goods causes volatility in the economy. When demand for manufactured goods decreases, it leads to less production with corresponding declines in employment and income.
The three most significant sectors include motor vehicles and parts, aircraft and information technology. Volatility in any these single sectors could affect the total.
Industrial production is subject to some monthly variation. As with all economic statistics, the three-month moving average of the monthly changes or year over year percent changes provide a clearer picture of the trend in this series.
