Industrial production increased 0.4% in August after moving up 0.8% in July. Late-month shutdowns related to Hurricane Ida held down the gain in industrial production by an estimated 0.3 percentage point. Although the hurricane forced plant closures for petrochemicals, plastic resins, and petroleum refining, overall manufacturing output rose 0.2%. Mining production fell 0.6%, reflecting hurricane-induced disruptions to oil and gas extraction in the Gulf of Mexico. The output of utilities increased 3.3%, as unseasonably warm temperatures boosted demand for air conditioning.
At 101.6% of its 2017 average, total industrial production in August was 5.9% above its year-earlier level and 0.3% above its pre-pandemic (February 2020) level. Capacity utilization for the industrial sector rose 0.2 percentage point in August to 76.4%, a rate that is 3.2 percentage points below its long-run (1972-2020) average.
What Is It?
It covers manufacturing, mining, and electric and gas utilities.
What Are The Fundamental Effects?
An upward movement in industrial output is a sign of a strengthening economy and the sectors that are placing orders for durable goods.
How Does It Affect The Markets?
CURRENCY - The Dollar usually reacts modestly to the industrial production, the report can be used to access future inflation and interest rates, a jump in industrial output suggests a faster economic growth.
STOCKS - This report generally does not move stocks that much, but strong production is positive for stocks as it suggests more economic growth and better corporate profits.
BONDS - A larger than expected jump could prompt a sell-off in the bond market.
US Capacity Utilization
What Is It?
The percentage of production capacity being utilized in the US.
What Is The Fundamental Effect?
It reflects overall growth and demand in the economy. It can also act as a leading indicator of consumer price inflation.