Econ Grapher

Industrial Production

What is Industrial Production?
Industrial Production is a globally produced economic report on changes in output for the industrial sectors of the economy. Industrial production is commonly used by central bankers in setting monetary policy due to its sensitivity to interest rates and consumer demand; it is also used in calculating capacity utilisation. The indicator gauges changes in the amount of output from manufacturing, mining, and utilities. In the US, the Federal Reserve releases a regular report on Industrial Production and Capacity utilization.

How does it relate to Markets?
Although in economies like the US industrial production accounts for less than 20% of the economy, it accounts for much of the cyclicality and thus can be used as a reliable economic indicator. It can also be used as a way of assessing how the central bank may be setting monetary policy e.g. if the utilisation rate goes above 85% then inflationary pressures will likely rise (and in turn monetary policy may tighten). The actual report on industrial production can also be taken apart to see which individual sectors are performing well, and thus can be used to support stock selection and investment timing. 

Sources and further reading:
Yahoo Finance Economic Calendar Terms - Industrial Production
Investopedia - Industrial Production Index
Econoday Event Definition - Industrial Production
US Federal Reserve Report on Industrial Production

Graph Library:
Metric - Industrial Production

Original Source: http://www.econgrapher.com/encyclopedia-industrialproduction.html

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