What It Measures
Industrial Production measures the real output (adjusted for inflation) of the U.S. industrial sector, covering:
- Manufacturing (~75% of index): Durable and nondurable goods production
- Mining (~15%): Oil, gas, and mineral extraction
- Utilities (~10%): Electric and gas utilities
The index is expressed relative to a base year (currently 2017 = 100).
Why It Matters
Cyclical Indicator: Industrial production is highly sensitive to the business cycle and often leads GDP.Manufacturing Health: Shows the strength of the U.S. manufacturing sector.Capacity Utilization: Released alongside capacity utilization, showing how much of productive capacity is being used.Global Trade Proxy: Manufacturing often reflects global demand conditions.
How to Interpret
Positive/Negative Growth: Look for sustained trends rather than single-month changes.Capacity Utilization: Above 80% suggests potential inflationary pressure; below 75% indicates slack.Manufacturing PMI Correlation: Should generally move in the same direction as ISM Manufacturing.