Econoday Economic Report: Industrial Production March 16, 2012

2012 Economic Calendar

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Industrial Production

Released On 3/16/2012 9:15:00 AM For Feb, 2012

	Prior	Prior Revised	Consensus	Consensus Range	Actual
Production - M/M change	0.0 %	0.4 %	0.5 %	0.2 % to 1.0 %	0.0 %
Capacity Utilization Rate - Level	78.5 %	78.8 %	78.8 %	78.5 % to 79.0 %	78.7 %
Manufacturing - M/M	0.7 %	1.1 %	0.5 %	0.4 % to 0.6 %	0.3 %

Highlights
Industrial production in February was unexpectedly soft but due to a drop in mining and flat utilities. Manufacturing rose moderately strong. Overall industrial production was unchanged in February after an upwardly revised 0.4 percent boost the month before (originally no change). Market expectations were for a 0.5 percent gain for February.

By major components, manufacturing increased 0.3 percent, following a 1.1 percent surge in January (previously up 0.7 percent). Analysts forecasted a 0.5 percent advance for the manufacturing component in the latest month. For the latest month, utilities were unchanged after a 2.2 percent drop in January. Mild winter weather has impacted utilities output. Meanwhile, mining output declined 1.2 percent, following a 1.6 percent dip the prior month.

Manufacturing excluding motor vehicles increased 0.4 percent, following a 0.6 percent gain in January. Motor vehicles and parts output dipped 1.1 percent after an 8.6 percent surge in January.

Overall capacity utilization posted at 78.7 percent versus 78.8 percent in January. The median market forecast was for 78.8 percent.

Despite the disappointing headline number for industrial production, manufacturing is in good shape. Manufacturing output growth is healthy, especially after discounting volatility from auto production. And recent regional manufacturing surveys have been positive.

The traditional non-NAICS numbers for industrial production may differ marginally from the NAICS basis figures.

Market Consensus before announcement
Industrial production overall was unchanged in January after a 1.0 percent jump the month before. By major components, manufacturing jumped 0.7 percent, following a 1.5 percent comeback in December. In January, utilities dropped 2.5 percent while mining output declined 1.8 percent. More recently, aggregate production worker hours in manufacturing for February posted a healthy 0.6 percent boost, indicating a robust increase for the manufacturing component of industrial production.

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

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

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

2012 Release Schedule

Released On: 1/18 2/15 3/16 4/17 5/16 6/15 7/17 8/15 9/14 10/16 11/16 12/14

Release For: Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov

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Actual Data Source: Haver Analytics