What it Measures:
Industrial Production is an inflation-adjusted index that measures the total real output of the manufacturing, mining and electric and gas utilities which account for the major part of variation in national output throughout the business cycle. The index is expressed as a percentage real output of the base year, currently 2002.
What effect it has:
If the Industrial Production number comes out higher-than-expected, that usually appreciates the U.S. Dollar, while a lower-than-expected number will prompt the Dollar’s decline.
How often it is released:
Released monthly, typically 16 days after the end of the month reviewed.
Why it is important:
Industrial Production is a leading economic indicator that, despite representing a small percentage of the GDP, is directly-affected by consumer demand and interest rates. It is typically used by banks, the Federal Reserve and economists to predict levels of inflation and economic performance.
Since Industrial Production typically acts as a leading indicator, it shows changes in advance of other economic indicators because it directly reflects consumer demand. With improving Industrial Production, other economic indicators tend to follow suit, although a large increase could be an indication of increasing inflation in the economy.
In addition, Industrial Production acts as an indicator of overall economic health since it is directly-affected by fluctuations in the business cycle that impact corporate profits and employment conditions in the economy. In addition, the Capacity Utilization indicator is directly-related to changes in the Industrial Production indicator, and the two indicators are generally released at the same time each month.
Post new comment