The index of industrial production measures the physical output of the nation's factories, mines and utilities. The industrial sector accounts for less than one-fifth of the economy but for most of its cyclical variation. The capacity utilization rate reflects the usage of available resources among factories, utilities and mines. A high and rising operating rate may signal that resources are being utilized to their fullest capacity -- a warning sign of inflationary pressures. Why Investors Care
| Released on 9/14/07 For Aug 2007 | |||||||||||||||||||||||||
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Highlights
Industrial production in August was mixed but the important manufacturing component declined, probably guaranteeing a cut in interest rates at this Tuesday's FOMC meeting. Overall industrial production increased by 0.2 percent in August, following a 0.5 percent boost in July. Overall industrial production came in below the market projection for a 0.3 percent rise in August. But the manufacturing component fell 0.3 percent in August, following a 0.7 percent boost in July. For August, utilities output surged 5.3 percent from higher electricity production while mining output fell 0.6 percent.
Overall capacity utilization was unchanged at 82.2 percent in August. However, August's level came in above the consensus forecast for an 82.0 percent capacity utilization rate and compares to July's initial estimate of 81.9 percent. The capacity utilization rate for manufacturing fell to 80.7 percent in August from 81.0 percent in July.
Within manufacturing, durables output slipped 0.3 percent in August, following a 1.1 percent gain in July. Nondurables declined 0.2 percent in the latest month, following a 0.4 percent rise in July. By industry, weakness was led by declines in motor vehicles, apparel products, textiles, and machinery. Industries showing greatest strength in August were printing (coming off a string of declines), primary metals, nonmetallic minerals, and fabricated metals. By market categories, consumer goods output edged up 0.1 percent in August while business equipment slipped 0.2 percent. Nonindustrial supplies were flat in August while materials output rose 0.2 percent.
Year-on-year, overall industrial production was up 1.7 percent in August while manufacturing also was up 1.7 percent.
Today's report shows a softening in manufacturing and the bond markets will like the numbers. Equities may start to wonder whether weakness is going to weaken further and there could be a negative reaction in equities.
The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.
Industrial production in July was robust with weakness in utilities masking strength in the headline number. Overall industrial production advanced by 0.3 percent in July, following a 0.6 percent jump in June. However, the manufacturing component posted a 0.6 percent gain in July, equaling June's surge. Overall capacity utilization edged up to 81.9 percent from 81.8 percent in June. More recently, data on the manufacturing sector have been mixed. New durables orders surged 5.9 percent in July. Various manufacturing surveys - such as the Chicago purchasing managers and the ISM - indicated that manufacturing growth for August is still positive but moderating. But the production hours index for manufacturing - from the August jobs report - showed a 0.3 percent drop, suggesting sluggish manufacturing.
Industrial production Consensus Forecast for August: +0.3 percent
Range: -0.1 to +0.5 percent
Capacity utilization Consensus Forecast for August 07: 82.0 percent
Range: 81.5 to 82.2 percent
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The industrial sector accounts for less than 20 percent of GDP. Yet, it creates much of the cyclical variability in the economy. |
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The capacity utilization rate reflects the limits to operating the nation's factories, mines and utilities. In the past, supply bottlenecks created inflationary pressures as the utilization rate hit 84 to 85 percent. |
| 2007 Release Schedule | ||||||||||||||||||||||||||
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