Transcript Industrial Production

Industrial Production and
Capacity Utilization
By:
Elizabeth Velasco
Sandra Martinez
Industrial Production and Capacity
Utilization
Published by: Board of Governors of the
Federal Reserve System
Frequency: Monthly
Period Covered: prior month
Volatility: Low
Market Significance: Medium/Moderate
New Release on the Internet:
www.federalreserve.gov/releases/g17/current
What is it?
Records U.S. Industry’s output and its spare capacity.
Industrial production index measures changes in production
between two different periods of time. It aims to measure
the average change in value of production.
IP Index must reflect:
- Variations in type and quality of the
commodities and of the input materials
- Changes in stock of finished goods and goods
in progress
- Related services, such as assembling of
production units, mounting installation, repairs,
planning, engineering.
What is in the report?
The reports include hours worked in
factories (from employment data) and the
amount of electric power consumed by
business (from power supply companies).
IP data is presented in two formats:
– By type of product, such as consumer goods,
business goods, intermediate goods, and
materials.
– Based on output by industry in broad, supplyside terms.
Why is it important?
IP covers nearly everything that is physically produced in
the U.S. and includes cars, umbrellas, paper clips,
electricity, and medical equipment.
It reacts fairly quickly to the ups and down of the
business cycle.
It has a good track record of forecasting changes in
manufacturing employment, average hourly earnings,
and personal income.
Monthly survey on IP index allows identifying the turning
points in economic growth at an early stage; also the
timely IP index is one of the most important measures of
economic activity.
Keys to Interpreting the Data
Industrial production figures are seasonally
adjusted in reports.
Final numbers can occasionally be distorted
because of bizarre weather, natural disasters, or
a major strike by labor.
To distinguish the true-underlying growth rate of
IP in the economy, it is best to look at a threemonth moving average.
The final revised index, three months later, vary
by an average of just 0.3 percentage points.
Latest Release
Industrial production decreased 0.2 percent in March after an
increase of 0.8 percent in February. Output in the manufacturing
sector moved up 0.7 percent in March; the increase was led by
advances in the production of durable goods.
Overall industrial production for March was 2.3 percent above its
year-earlier level.
The output of utilities dropped 7.0 percent, largely reversing its
February jump of 7.6 percent, as temperatures swung from below
seasonal norms in February to above seasonal norms in March.
The rate of capacity utilization for total industry fell 0.2 percentage
point, to 81.4 percent, a level 0.4 percentage point above its 19722006 average.
Latest Release
IP and Capacity Utilization: Summary
Seasonally adjusted
2002=100
Percent Change
Industrial
Production
2006
Dec.
2007
Jan.
2007
Feb.
2007
Mar.
2006
Dec.
2007 Jan.
2007
Feb.
2007
Mar.
Mar.’06 to
Mar.’07
Total Index
112.2
111.8
112.7
112.5
.6
-.4
.8
-.2
2.3
Previous
Estimates
112.4
112.1
113.1
.8
-.3
1.0
Major Market
Groups Final
Products
113.6
113.0
114.4
114.0
.7
-.5
1.2
-.4
3.3
Consumer
Goods
107.8
107.8
109.6
108.9
.2
.0
1.6
-.6
2.1
Business
Equipment
132.1
129.2
129.6
130.6
2.0
-2.2
.3
-.1
.0
Nonindustrial
Supplies
110.1
109.6
110.0
109.9
.5
-.4
.6
.0
2.2
Construction
109.7
108.6
107.8
109.0
2.2
-1.0
-.8
1.2
-2.1
Materials
111.7
111.3
111.9
111.9
.6
-.4
.6
.0
2.2
Major Industry
Groups
Manufacturing
114.4
113.7
113.8
114.6
1.1
-.6
.1
.7
2.6
Previous
Estimates
114.4
113.9
114.3
1.0
-.5
.4
Mining
102.5
100.9
101.2
101.3
1.8
-1.6
.3
.1
2.7
Utilities
102.5
105.0
113.0
105.1
-4.1
2.4
7.6
-7.0
-.4
Historical Data
Data Analysis
Based on the information from the
indicator, we conclude:
-Industrial Production increased by 2.3%
compared to last year’s level
-Industrial Production is very close to 3%
of potential GDP (3.5-4%)
- The Federal Reserve should not be
concerned about economic growth