Econ Grapher

Production

What is Production?
Production or manufacturing is the process of transforming inputs into outputs. This transformation process can include the addition of new inputs, the refining or altering of the inputs, etc. The transformation process can result in outputs that are purchased by consumers as finished goods, or by other producers as inputs into production or intermediate goods, and to distribution intermediaries that sell to consumers etc. In looking at the steps of the production process, it usually starts as raw material extraction; then into manufacturing production, then to transportation and distribution, then to utilisation and reuse; and even recycling (which can be the beginning of the cycle again).

How does it relate to Markets?
Production is an important part of the economy, as such it is important to watch in the context of the markets. The most watched indicators in this respect are industrial production and the PMI (Purchasing Managers Index). Within industrial production - which measures the pace of expansion within that sector - are also capacity utilisation metrics which can be used to assess latent inflationary pressures. Industrial production is so widely watched (not only because their is many industrial/manufacturing companies listed on the stock exchange) because manufacturing tends to be very cyclical in nature (i.e. in good times people buy more, so producers need to keep up with demand by making more things).

Sources and further reading:
Business Dictionary - Production
Stanford - "How Everyday Things Are Made"
Grant Thornton - Manufacturing: adapting in difficult times
Econ Grapher - Industrial Production
Wikipedia - Manufacturing

Graph Library:
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Original Source: http://www.econgrapher.com/encyclopedia-production.html

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