Econoday Economic Report: Industrial Production November 16, 2012

2012 Economic Calendar

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Industrial Production

Released On 11/16/2012 9:15:00 AM For Oct, 2012

	Prior	Prior Revised	Consensus	Consensus Range	Actual
Production - M/M change	0.4 %	0.2 %	0.2 %	-0.1 % to 0.5 %	-0.4 %
Capacity Utilization Rate - Level	78.3 %		78.4 %	78.1 % to 78.5 %	77.8 %
Manufacturing - M/M	0.2 %	0.1 %	0.3 %	0.1 % to 0.5 %	-0.9 %

Highlights
Industrial production declined 0.4 percent in October after having increased 0.2 percent in September. Hurricane Sandy, which held down production in the Northeast region at the end of October, is estimated by the Fed to have reduced the rate of change in total output by nearly 1 percentage point. The largest estimated storm-related effects included reductions in the output of utilities, of chemicals, of food, of transportation equipment, and of computers and electronic products.

Market expectations apparently were way off on Sandy impact with the consensus at up 0.2 percent for overall industrial production.

In October, the index for manufacturing decreased 0.9 percent, following a 0.1 percent gain in September. Excluding storm-related effects, factory output was roughly unchanged from September. The output of utilities edged down 0.1 percent in October, and production at mines advanced 1.5 percent.

Manufacturing excluding motor vehicles dropped 0.9 percent after a 0.2 percent rise in September.

Capacity utilization for total industry decreased 0.4 percentage point to 77.8 percent in October.

Overall, Hurricane Sandy has really messed with the numbers and the marginal trend is hard to determine. It looks like output is going to be depressed in any economic measure for October or the fourth quarter due to hurricane effects-which do not represent underlying economic fundamentals.

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

Market Consensus before announcement
Industrial production made a partial comeback in September. Overall industrial production rebounded 0.4 percent in September after falling 1.4 percent in August. However, according to the Fed, roughly 0.3 percentage points of the decline in overall industrial production in August reflected the effect of precautionary idling of production in late August along the Gulf of Mexico in anticipation of Hurricane Isaac, and part of the rise in September was a result of the subsequent resumption of activity at idled facilities. By major components, manufacturing rose 0.2 percent, following a drop of 0.9 percent in August. Motor vehicles production dipped 2.5 percent, following a 5.1 percent decrease in August. Manufacturing excluding motor vehicles rebounded 0.4 percent after a 0.6 percent decline the month before. Overall capacity utilization rose to 78.3 percent from 78.0 percent in August. Looking ahead, the manufacturing component of industrial production may be sluggish in October as aggregate production hours for manufacturing edged up only 0.1 percent.

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