| Industrial Production |
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Released On 7/15/2011 9:15:00 AM For Jun, 2011
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Prior | Consensus | Consensus Range | Actual |
| Production - M/M change | 0.1 % | 0.4 % | 0.1 % to 0.6 % | 0.2 % | | Capacity Utilization Rate - Level | 76.7 % | 76.9 % | 73.5 % to 77.0 % | 76.7 % |
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Highlights
Industrial production in June rose moderately, but mainly due to a rebound in the utilities component. Manufacturing, however, was soft. Overall industrial production in June advanced a modest 0.2 percent, following a 0.1 percent dip in May (originally up 0.1 percent). The market consensus called for a 0.4 percent boost.
Manufacturing, however, was soft with no change after a 0.1 percent increase the month before (originally up 0.4 percent). The auto component has pulled down on production with three consecutive declines. The auto component fell 2.0 percent in June, following a 0.3 percent decrease the month before. Excluding motor vehicles, manufacturing rose 0.2 percent, following a 0.1 percent uptick in May.
Turning to other major sectors, utilities rebounded 0.9 percent after dropping 2.0 percent in May. Mining output grew 0.5 percent after a 0.7 percent increase.
On a year-on-year basis, overall industrial production improved to 3.4 percent from 3.3 percent in May.
Overall capacity utilization in June held steady at 76.7 percent. The June figure posted lower than analysts' estimate for 76.9 percent.
Despite the rebound at the headline level, the overall report is somewhat disappointing given the flat number for manufacturing and downward revisions to May components. However, at least the weakness in auto is likely temporary. Meanwhile, markets are focusing on Google's outstanding numbers release after close yesterday.
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 May edged up 0.1 percent, following no change in April. Weakness was largely in utilities as manufacturing made a comeback, rebounding 0.4 percent in May, following a 0.5 percent fall the prior month. Flat motor vehicle assemblies damped manufacturing. Excluding motor vehicles, manufacturing advanced a robust 0.6 percent after a 0.1 percent dip in April. Overall capacity utilization in May was unchanged at 76.7 percent.
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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=21099)
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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=21100)
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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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