| Industrial Production |
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Released On 10/17/2011 9:15:00 AM For Sep, 2011
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Prior | Prior Revised | Consensus | Consensus Range | Actual |
| Production - M/M change | 0.2 % | | 0.2 % | 0.0 % to 0.4 % | 0.2 % | | Capacity Utilization Rate - Level | 77.4 % | 77.3 % | 77.5 % | 77.2 % to 77.7 % | 77.4 % |
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Highlights
Manufacturing-especially autos-continues to lead industrial production. In September, industrial production advanced 0.2 percent, following no change the month before (originally up 0.2 percent) and a 1.1 percent jump in July (previously up 0.9 percent). Analysts had projected a 0.2 percent rise for September.
By major industry, manufacturing improved to a 0.4 percent rise after a 0.3 percent boost in August (previously estimated at up 0.5 percent). The auto component increased another 0.7 percent after a gain of 1.5 percent in August. Outside of autos, manufacturing is still healthy. Strength was in durables as nondurables declined marginally. Excluding motor vehicles, manufacturing rose 0.3 percent, equaling the pace for the prior month.
In other major sectors, utilities output fell 1.8 percent after declining 2.9 percent in August. Mining output expanded 0.8 percent, matching the growth rate for August.
On a seasonally adjusted year-on-year basis, overall industrial production was up 3.2 percent in September, compared to 3.3 percent in August.
Overall capacity utilization in September improved to 77.4 percent from 77.3 percent in August (originally 77.4). The September rate was slightly lower than analysts' estimate for 77.5 percent.
The manufacturing sector continues to post better numbers at the national level than in many regional surveys. Gains continue to be moderately healthy and somewhat broad based though more in durables than in nondurables.
On the news release, equity futures were mixed and little changed compared to prior to the release. The earlier released Empire State manufacturing survey was a little disappointing and weighed on equity futures.
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 softened in August, rising 0.2 percent, following a 0.9 percent jump the month before. Sluggishness was related to utilities. By major industry, manufacturing remained strong with a 0.5 percent rise after a robust 0.6 percent gain in July. The auto component advanced another 1.7 percent after a rebound of 4.5 percent in July. 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. Overall capacity utilization in August edged up to 77.4 percent from 77.3 percent the prior month. Looking ahead, the manufacturing component outside of autos is likely to be soft in September as production worker hours in manufacturing were flat for the month.
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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=21513)
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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=21514)
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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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