2015 Economic Calendar
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Industrial Production  
Released On 6/15/2015 9:15:00 AM For May, 2015
PriorPrior RevisedConsensusConsensus RangeActual
Production - M/M change-0.3 %-0.5 %0.2 %0.1 % to 0.5 %-0.2 %
Manufacturing - M/M0.0 %0.1 %0.3 %0.2 % to 0.4 %-0.2 %
Capacity Utilization Rate - Level78.2 %78.3 %78.4 %78.2 % to 78.7 %78.1 %

Highlights
The hawks may have some good arguments at this week's FOMC meeting but they won't have anything convincing to say on the manufacturing sector which, instead of rebounding from a weak first quarter, appears to be slowing further. All the main numbers in today's industrial production report are below low-end forecasts with the headline at minus 0.2 in May and April revised 2 tenths lower to minus 0.5. May is the fourth negative reading in the last six months with the other readings at no change. Capacity utilization fell 2 tenths to 78.1 percent which is the lowest rate since January 2014.

The manufacturing component fell 0.2 percent in May for the third negative reading in five months. Weakness in May was concentrated in consumer goods and construction supplies, the latter a disappointing indication for the housing sector. The mining component, at minus 0.3 percent, has really been hit hard by weakness in the energy sector but, in a plus, contraction here seems to be easing. The utilities component is positive but just barely at plus 0.2 percent.

Turning back to manufacturing, vehicles are actually a very big positive with a third outsized gain in a row, at plus 1.7 percent in May vs 2.0 percent and 4.0 percent in the two prior months. This reflects very strong consumer demand for cars and trucks underscoring unit vehicle sales which, in previously released data, are the strongest in 10 years. Excluding vehicles, however, the decline in May manufacturing slips another tenth to minus 0.3 percent. Another area of strength is capital goods which is showing life in the durable goods report and which here, tracked in the business equipment subcomponent, shows a 0.2 percent gain for May.

Otherwise, however, this report is surprisingly weak and echoes this morning's equally surprisingly weak Empire State report for June. Though there are no separate readings on exports in either of this morning's reports, weakness here appears to be pulling down the manufacturing sector.

Consensus Outlook
Industrial Production can swing back and forth on utility output but a look at the other two components tells the real story: mining, hit by low commodity prices, has been down for five months in a row while manufacturing, hit not only by low commodity prices but also by weak export demand, has been down in three of the last five which does not include an unimpressive no change reading for April. The Econoday consensus is calling for a little strength in May, at plus 0.2 percent for the headline which is very little, but a respectable 0.3 percent manufacturing gain.

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 2012. The capacity index, which is an estimate of sustainable potential output, is also expressed as a percentage of actual output in 2012. The rate of capacity utilization equals the seasonally adjusted output index expressed as a percentage of the related capacity index.

The index of industrial production is available nationally by market and industry groupings. The major groupings are comprised of final products (such as consumer goods, business equipment and construction supplies), intermediate products and materials. The industry groupings are manufacturing (further subdivided into durable and nondurable goods), mining and utilities. The capacity utilization rate -- reflecting the resource utilization of the nation's output facilities -- is available for the same market and industry groupings.

Industrial production was also revised to NAICS (North American Industry Classification System) in the early 2000s. Unlike other economic series that lost much historical data prior to 1992, the Federal Reserve Board was able to reconstruct historical data that go back more than 30 years.  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
 
 

2015 Release Schedule
Released On: 1/162/183/164/155/156/157/158/149/1510/1611/1712/16
Release For: DecJanFebMarAprMayJunJulAugSepOctNov
 


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