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 11/16/07 For Oct 2007 | |||||||||||||||||||||||||
| |||||||||||||||||||||||||
Highlights
Industrial production in October came in much weaker than expected, posting a sharp decline. Overall industrial production fell 0.5 percent in October, following a 0.2 percent up tick the month before. Overall industrial production was sharply below the consensus forecast for a 0.1 percent rise in October. The manufacturing component dropped 0.4 percent in October, following a 0.2 percent gain the prior month. For October, utilities output fell 1.6 percent while mining output declined 0.6 percent.
Overall capacity utilization fell in line with the output drop, declining to 81.7 percent in October from 82.2 percent the month before. The latest came in below the consensus forecast for an 82.0 percent capacity utilization rate and compares to September's initial estimate of 82.1 percent. The capacity utilization rate for manufacturing stood at 80.1 percent in October, down from 80.5 percent in September.
By market groups, weakness was primarily in consumer goods, construction supplies, and business supplies. Consumer goods were down 0.7 percent; construction supplies, down 0.4 percent; and business supplies, down 0.8 percent. Business equipment edged down 0.1 percent.
The auto sector was mixed. Auto assemblies actually rose to a 3.92 million unit annualized pace from 3.64 million in September. Light truck assemblies slipped to a 6.23 million unit annualized pace from 6.48 million units in September.
Within manufacturing, durables output slipped 0.2 percent in October, following a 0.1 percent dip in September. Nondurables dropped 0.4 percent after a 0.4 percent boost the month before.
Year-on-year, overall industrial production was up 1.8 percent in October, down from 2.1 percent in September.
Today's report shows a weakening manufacturing sector despite support from a lower dollar and increased exports. Bonds will like the news while equities will not. The Fed is now having some tough choices to make in terms of lowering rates to support economic growth or keeping interest rates where they are to fight higher headline inflation.
The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.
Industrial production edged up 0.1 percent in September, following no change in August. The manufacturing component increased 0.1 percent in September, following a 0.4 percent decline the prior month. Overall capacity utilization was unchanged at 82.1 percent in September while the capacity utilization rate for manufacturing eased to 80.4 percent in September from 80.5 percent the previous month. More recently, various manufacturing surveys have been mixed but mostly sluggish. Meanwhile, production worker hours for October fell 0.4 percent, suggesting weak manufacturing output for the month.
Industrial production Consensus Forecast for October: +0.1 percent
Range: -0.5 to +0.3 percent
Capacity utilization Consensus Forecast for October 07: 82.0 percent
Range: 81.8 to 82.3 percent
![[Chart]](chart.gif)
|
The industrial sector accounts for less than 20 percent of GDP. Yet, it creates much of the cyclical variability in the economy. |
![[Chart]](chart_1.gif)
|
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 | ||||||||||||||||||||||||||
|
powered by
![[Econoday]](../../../../../../../../../images/logo.gif){kind=logo}