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 2/15/08 For Jan 2008 | |||||||||||||||||||||||||
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Highlights
Industrial production in January was soft but at least met expectations. Overall industrial production edged up 0.1 percent in January, matching December's rise. Overall industrial production equaled the consensus forecast for a 0.1 percent gain in January. The manufacturing component, however, was flat in January, following a 0.2 percent gain in December. For January, utilities output jumped 2.2 percent while mining output slumped 1.8 percent.
Overall capacity utilization was unchanged at 81.5 percent in January and compared to the consensus forecast of 81.4 percent. The capacity utilization rate for manufacturing edged down to 79.7 percent in January from 79.8 percent in December. Capacity utilization in manufacturing continues a slow downtrend and suggests some easing in resource utilization. This helps the Fed see its forecast for moderating inflation staying on track.
By market groups in January, production was led by business equipment and by consumer goods, which were up 0.4 percent and 0.3 percent, respectively. Nonindustrial supplies were unchanged while materials production slipped 0.1 percent. The housing recession continues to tug down on manufacturing as the construction supplies subcomponent of nonindustrial supplies fell 1.1 percent. Within consumer goods, appliances, furniture & carpeting dropped 2.1 percent in the latest month while automotive products declined 1.2 percent. Strength was in energy, which posted a 2.9 percent surge in January.
Within manufacturing, durables output was unchanged in January, following a 0.2 percent dip in December. Nondurables edged up 0.1 percent after declining 0.2 percent the prior month.
Year-on-year, overall industrial production was up 2.3 percent in January, compared to up 1.8 percent in December. Despite the year-on-year rise, the growth pace is still sluggish and likely to ease in coming months.
Today's report points to a slowing manufacturing sector with today's earlier release for a negative Empire State manufacturing report suggesting that it may worsen further. While bonds will like the report, equities most likely will not even though today's manufacturing numbers keep the Fed on track for another rate cut at the next FOMC meeting, rising import prices notwithstanding.
The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.
Industrial production was flat in December, following a 0.3 percent gain the prior month. The manufacturing sector is giving very mixed signals. Durables orders spiked in December but a number of manufacturing surveys have been less optimistic. The ISM manufacturing index has been stuck right at the break-even level for the last six months. The employment situation report suggests a soft January for manufacturing output -- aggregate hours in manufacturing were unchanged in January, following a 0.6 percent drop the month before.
Industrial production Consensus Forecast for January: +0.1 percent
Range: -0.1 to +0.5 percent
Capacity utilization Consensus Forecast for January 08: 81.4 percent
Range: 81.2 to 81.6 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. |
| 2008 Release Schedule | ||||||||||||||||||||||||||
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