Wednesday, May 15, 2013

U.S. Industrial Production Misses Badly

Industrial Production
Released On 5/15/2013 9:15:00 AM For Apr, 2013
PriorConsensusConsensus RangeActual
Production - M/M change0.4 %-0.2 %-0.5 % to 0.3 %-0.5 %
Capacity Utilization Rate - Level78.5 %78.3 %77.9 % to 78.6 %77.8 %
Manufacturing - M/M-0.1 %0.1 %-0.2 % to 0.4 %-0.4 %
Highlights
Manufacturing weakened in April. Overall industrial production declined 0.5 percent after gaining 0.3 percent in March (originally up 0.4 percent). The April number was a big miss as market expectations were for a 0.2 percent rise.

The manufacturing component fell 0.4 percent after a 0.3 percent dip in March. Market expectations were for a 0.1 percent rise for the manufacturing component. Excluding motor vehicles, manufacturing declined 0.3 percent in April after a 0.5 percent drop the prior month.

The output of utilities dropped 3.7 percent after jumping a monthly 5.3 percent in March. Production at mines rebounded 0.9 percent after slipping 0.2 percent in March.

Capacity utilization for total industry declined to 77.8 percent in April from 78.3 percent the prior month. Expectations were for 78.3 percent.

More detail coming. Please check back.
Market Consensus before announcement
Industrial production was up more than expected in March but it was due to utilities output, not manufacturing, which declined. Overall industrial production gained 0.4 percent after a 1.1 percent spike in February. Unusually cold weather drove up utilities output. The manufacturing component slipped 0.1 percent after rebounding 0.9 percent in February. Excluding motor vehicles, manufacturing decreased 0.3 percent in March after a 0.8 percent increase the prior month. Capacity utilization for total industry firmed to 78.5 percent from 78.3 percent in February. Looking ahead, production worker hours in manufacturing decreased 0.2 percent for the month, suggesting a weak manufacturing component for April 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
 
[Chart]
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
 
[Chart]
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