Industrial Production

Industrial Production shows total output of the nation's factories, mines, and utilities etc. Federal Reserve statistical report contains the index of change in manufacturing production output, stocks and bonds of public utilities and estimating of capacity utilization. Industrial Production is the key indicator of the state of the nation's industry. The share of industrial production is about 40% of the economy of the country that explains its strong influence on the stock market.

Percent change in industrial production in comparison with the previous month is of special interest. In case production increases, the value of money also increases that stimulates growth in the stock market and vice versa fall in the bond market.

In the report on Industrial Production Manufacturing Production is estimated separately, it shares 85% of the total production output. Capacity utilization is also estimated. Its market importance is not as high as that one of industrial production though it is a good indicator of economic stocks. Thus, on the basis of industrial production data capacity utilization coefficient may be forecasted precisely. The optimum value for this indicator is 81.5%. The value of more than 85% signals that the economy is overheated. Though even excessive value of this indicator may trigger currency strengthening, as high pressure economy brings about inflation and the Fed may raise discount rate. In case the value of the indicator is much lower than the optimum one it signals weak economy and may trigger currency weakening. Price of suppliers of goods may influence estimating as this price increase may push stocks and bonds prices down.

Frequency: Released monthly at 17:15.

Market importance: Middle.

Analysis: From the mid of 2003 this indicator has formed steady uptrend. Recently industrial production slowdown has been observed.

Analysis: At the end of 2006 decrease in industrial production was observed, then the indicator recovered insignificantly in December. Last year high rates of growth of industrial production were observed, though sharp slowdown has been forming since September.

Conclusion:
1. Annual rates of growth of industrial production fell sharply in December to 3.0%. Economic slowdown and stock increase may trigger this indicator slowdown in the mid-term perspective.
2. Forecasts are adequate to the situation, figures may be higher than projected.