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 12/14/07 For Nov 2007 | |||||||||||||||||||||||||
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Highlights
Industrial production bounced back in November, up 0.3 percent vs. a 0.7 percent drop in October. The gain was centered where it should be, in manufacturing which rose 0.5 percent to almost reverse October's 0.6 percent drop. Manufacturing strength was once again centered in business equipment which jumped 0.9 percent though the year-on-year rate is a bit mild at 4.0 percent. Foreign demand for capital goods, including machinery, is very strong, one of the benefits of the weak dollar and also reflecting global infrastructure demand. Consumer goods are another story, extending a long run of monthly declines with a 0.2 percent dip in November. Year-on-year growth for consumer goods is below the rate of inflation at 0.7 percent.
The two other industry groups in the report were mixed with mining up 1.1 percent for 2.1 percent year-on-year growth but utilities down 1.3 percent for a 1.2 percent on-year growth rate. Capacity utilization, which isn't a concern right now given prospects of slowing demand, rose 1 tenth to 81.5 percent for a mild 1.8 percent year-on-year growth rate. Utilization in the manufacturing sector is tame at 79.9 percent.
Today's data are a plus for the economic outlook, suggesting that manufacturing isn't in a slump. The ISM manufacturing report for December was modest but still points to growth ahead, though limited growth. The Federal Reserve has plenty of worries right now, including inflation as seen in this morning's CPI report, but manufacturing doesn't seem to be in danger. There was no significant reaction to the report.
Industrial production fell 0.5 percent in October, following a 0.2 percent up tick the month before. 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. More recently, manufacturing indicators have been mixed with regional manufacturing surveys mostly marginally positive but factory orders have been soft outside of industries affected by price hikes in petroleum. Aggregate hours in manufacturing rebounded 0.2 percent in November, following a 0.4 percent decrease in October. The November increase suggests that industrial production is likely to be modestly positive for the month.
Industrial production Consensus Forecast for November 07: +0.1 percent
Range: -0.2 to +0.3 percent
Capacity utilization Consensus Forecast for November 07: 81.7 percent
Range: 81.4 to 81.8 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. |
![[Chart]](chart_1.gif)
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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. |
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