| Industrial Production |
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Released On 2/16/2011 9:15:00 AM For Jan, 2011
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Prior | Prior Revised | Consensus | Consensus Range | Actual |
| Production - M/M change | 0.8 % | | 0.5 % | -0.8 % to 0.7 % | -0.1 % | | Capacity Utilization Rate - Level | 76.0 % | 76.2 % | 76.3 % | 75.2 % to 76.5 % | 76.1 % |
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Highlights
Key underlying detail on major components reversed position in January from December. This time a decline in utilities output masked a moderately healthy showing in the manufacturing component. Industrial production dipped 0.1 percent, following a 1.2 percent jump in December. The latest number fell short of analysts' projection for a 0.5 percent gain. January's decrease was led by a 1.6 percent fall in utilities output, following a 4.1 percent spike in December. Also, mining tugged down on industrial production, declining 0.7 percent in the latest month. In contrast, manufacturing output advanced 0.3 percent after a 0.9 percent jump in December.
Within manufacturing, output of motor vehicles and parts was up a sizeable 3.2 percent, following a 0.2 percent gain in December. Excluding autos, manufacturing edged up 0.1 percent in January after a 0.9 percent jump in December. Essentially, manufacturing is continuing a healthy uptrend with some months stronger than others.
On a year-on-year basis, overall industrial production slowed to 5.2 percent from 6.3 percent in December.
Overall capacity utilization slipped in January on the decline in utilities and mining, easing to 76.1 percent in January from 76.2 percent the month before. The January rate came in lower than the median forecast for 76.3 percent.
Volatility in the utilities component has been making the headline production number unreliable as a measure of underlying strength. In contrast, manufacturing continues to post healthy gains.
The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.
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Market Consensus before announcement
Industrial production in December posted a healthy 0.8 percent gain, following a 0.3 percent rebound in November. However, the boost was led by a monthly 4.3 percent surge in utilities output, following a 1.5 percent increase in November. Utilities were up on atypically cold weather in the East. Nonetheless, manufacturing increased a healthy 0.4 percent after a 0.3 percent rise in November. Overall capacity utilization continued to improve, rising to 76.0 percent in December from 75.0 percent in November. Looking ahead, the headline number for industrial production in January likely will not get as much lift (if not a partial reversal) from the utilities component. There are mixed results for earlier released data with some forecasting content for the manufacturing component of industrial production. Production worker hours for this sector were flat in January. In contrast, manufacturing surveys were strong with ISM, Philly Fed, and Empire State all well into positive territory.
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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 2007. The capacity index, which is an estimate of sustainable potential output, is also expressed as a percentage of actual output in 2007. The rate of capacity utilization equals the seasonally adjusted output index expressed as a percentage of the related capacity index.
Why Investors Care
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![[Chart]](showimage.asp?imageid=20413)
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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.
Data Source: Haver Analytics
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![[Chart]](showimage.asp?imageid=20414)
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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.
Data Source: Haver Analytics
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