Industrial Production MoM

Industrial Production MoM is the monthly percent change in the Industrial Production index (a weighted gauge of real output).

The Federal Reserve Board builds it from physical product counts, production-worker hours and annual benchmarks.

It covers 3 sectors only, namely manufacturing, mining and utilities, built from 297 individual series.

Monthly moves in 130 series use input-type measures only, mainly worker hours with a productivity correction.

It appears in release G.17 with capacity and utilization data for the same industries.

It measures production (goods leaving the line), not shipments, sales or orders.

It has no 50-point breakeven like a PMI survey (a sentiment poll).

The index level is shown as 100 for the base-period average, so a rise means expansion and a fall means contraction.

Releases arrive around the middle of the following month at 9:15 a.m. Eastern time, with the annual revision issued at noon.

Each release also reports capacity (sustainable maximum output) and utilization (output as a share of capacity).

The first estimate uses about 78% of source data, then revisions follow over 5 months toward 98%.

Each annual revision refreshes history with yearly benchmarks, value-added weights and seasonal factors.

Values are marked preliminary then revised.

Headline moves with 3 sectors, weighted by value added (share of output value).

• Manufacturing, 73.22%: all factory output; the headline is dominated by this sector.

• Durable manufacturing, 36.68%: long-lived goods such as machinery, metals and transport equipment, including motor vehicles and parts at 5.43%.

• Nondurable manufacturing, 34.82%: short-lived goods such as food, chemicals, paper and fuels.

• Mining, 16.01%: oil, gas, coal and drilling support; it swings with energy activity.

• Utilities, 10.77%: electric power and gas distribution; weather makes it volatile month to month.

• Other manufacturing, 1.72%: logging and parts of publishing kept in industry by tradition.

In a sharp fall total output fell 5.4% in one month and then 11.2% in the next month.

The 11.2% fall was the largest monthly drop in 101-year index history.

Manufacturing fell 13.7% in the same month as motor vehicles and parts dropped over 70%.

In the rebound total output rose only 1.4% although motor vehicles jumped 120.8%.

Its weight had shrunk to 1.12% and added about 1.35 percentage points to the headline.

Output stayed 15.4% below the pre-shock level while motor parts stayed over 60% below it, and mining and utilities still fell.

1. Annual benchmark (yearly anchor): For each factory industry, build real output from Census value added plus materials minus resales.

Deflate it (remove price effects) with a chain-type price index (a moving-weight price gauge).

1. Monthly indicator (within-year movement): Where possible use physical counts like tons or vehicle assemblies as daily averages indexed to base output where base equals 100.

Where unavailable, use production-worker hours times a productivity factor; complex goods use price and quantity data.

1. Seasonal adjustment (calendar smoothing): Adjust each series with X-13 ARIMA (a standard calendar filter) and sum adjusted components; never adjust totals directly.

1. Fisher aggregation and MoM (combining industries): Combine industries with a Fisher-ideal formula (a geometric mean of prior-month and current-month changes) using monthly value-added prices.

Compute MoM as 100 times the change divided by the prior month from unrounded indexes; utilization equals output divided by capacity.

1. Contribution and example (reading parts): A part contributes about its relative-importance weight (prior-month value share) times its growth.

For example, 2 industries with weights 0.90 and 0.10 growing 2% and 10% lift total about 2.8%.

Key point: A big monthly rebound does not mean recovery to the prior level.

Vehicles jumped 120.8% yet stayed over 60% below the pre-shock level, and total output stayed 15.4% below it.

Weights move, coverage is factories, mines and utilities only, not sales.