| Industrial Production |
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Released On 9/15/2011 9:15:00 AM For Aug, 2011
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Prior | Prior Revised | Consensus | Consensus Range | Actual |
| Production - M/M change | 0.9 % | | 0.1 % | -0.1 % to 0.3 % | 0.2 % | | Capacity Utilization Rate - Level | 77.5 % | 77.3 % | 77.5 % | 77.3 % to 77.7 % | 77.4 % |
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Highlights
After a strong July, manufacturing momentum remained relatively healthy in August-partly due to a continuing rebound in auto assemblies. But overall industrial production softened in August, rising 0.2 percent, following a 0.9 percent jump the month before (no revision). Sluggishness was related to utilities. The August number came in a little higher than the market median forecast for a 0.1 percent uptick.
By major industry, manufacturing remained strong with a 0.5 percent rise after a robust 0.6 percent gain in July (no revision). The auto component advanced another 1.7 percent after a rebound of 4.5 percent in July. Outside of autos, manufacturing is still healthy. Excluding motor vehicles, manufacturing rose 0.4 percent, following a 0.3 percent increase the prior month.
In other major sectors, utilities output fell back 3.0 percent after surging 2.8 percent in July on atypically hot weather. Mining output grew 1.2 percent after increasing 1.1 percent in July.
On a year-on-year basis, overall industrial production was up 3.4 percent in August, matching the pace in July.
Overall capacity utilization in August edged up to 77.4 percent from 77.3 percent the prior month (originally 77.5). The August rate posted slightly lower than analysts' estimate for 77.5 percent.
Despite the negativism in various manufacturing surveys, national production numbers continue to look good-especially for manufacturing. On the news, equity futures rose modestly.
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Market Consensus before announcement
Industrial production in July posted a 0.9 percent gain, following a 0.4 percent rise the prior month. By major industry, manufacturing showed significant improvement, advancing 0.6 percent, following rise of 0.2 percent in June. The auto component finally made a comeback, jumping a monthly 5.2 percent after three consecutive declines including June's 0.9 percent decrease. Excluding motor vehicles, manufacturing rose 0.3 percent, following a 0.2 percent rise in June. Turning to other major sectors, utilities output rose 2.8 percent after increasing 0.8 percent in June. Mining output advanced 1.1 percent after growing 1.2 percent in June. Overall capacity utilization in July improved to 77.5 percent from 76.9 percent the prior month. Looking ahead, the manufacturing component of industrial production is likely to be soft in August as production worker hours slipped 0.1 percent for the month. Also, the ISM manufacturing index was just barely above breakeven while regional manufacturing indexes have been weak.
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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=21380)
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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=21381)
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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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