| Industrial Production |
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Released On 3/17/2011 9:15:00 AM For Feb, 2011
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Prior | Prior Revised | Consensus | Consensus Range | Actual |
| Production - M/M change | -0.1 % | | 0.6 % | 0.5 % to 0.9 % | -0.1 % | | Capacity Utilization Rate - Level | 76.1 % | 76.4 % | 76.5 % | 76.3 % to 76.8 % | 76.3 % |
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Highlights
One sector of the economy clearly is gaining momentum as manufacturing posted another healthy gain-but one masked at the headline level for industrial production by a drop in utilities output. Overall industrial production in February slipped 0.1 percent, following a revised 0.3 percent gain the prior month. The latest fell far short of the consensus forecast for a 0.6 percent boost. The dip in February was led by a 4.2 percent drop in utilities output, following a 4.5 percent decrease the month before. Utilities were down on atypically warm weather for the month. In contrast, manufacturing output posted 0.4 percent gain after a 0.9 percent surge in January. Mining output rebounded 0.8 percent, following a 0.7 percent decline in January.
Within manufacturing, output of motor vehicles and parts was up a sharp 4.2 percent, following a 4.5 percent boost in January. Excluding autos, manufacturing rose 0.2 percent in January after a 0.7 percent jump the prior month.
On a year-on-year basis, overall industrial production stood at up 5.6 percent-the same as in January.
Total capacity utilization in February edged down to 76.3 percent from 76.4 percent the prior month. The February rate fell short of the median forecast for 76.5 percent.
Overall, the headline numbers continues to be whipsawed by atypical changes in weather. But manufacturing continues a healthy uptrend. Yes, autos was behind the bulk of the manufacturing gain, but the moderate increase in the nonauto component looks good in the context of very strong recent advances. Also, within manufacturing gains were widespread.
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 January dipped 0.1 percent, following a 1.2 percent jump in December. January's decrease was led by a 1.6 percent fall in utilities output, following a 4.1 percent spike in December. Basically, atypical winter weather has led utilities output to cause sharp swings in headline industrial production. Also for January, 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. So, the key manufacturing component is doing well. 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. Looking ahead, the manufacturing component of industrial production should be robust in February as production worker hours in manufacturing jumped 0.7 percent. Also, headline indexes from manufacturing surveys for ISM, Philly Fed, and New York Fed were at healthy levels.
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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=20554)
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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=20555)
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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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