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Home Publications Blogs Beat the Press In Industrial Production Data, Focus on Manufacturing

In Industrial Production Data, Focus on Manufacturing

Wednesday, 18 April 2012 05:17

The Federal Reserve Board's data on industrial production are often badly misinterpreted. The error occurs for two reasons. First, there are often large revisions to the monthly data and second, the aggregate index is often moved by large changes in mining or utility output.

The data for March released yesterday gave us examples of both. Therefore the NYT missed the story when it gave us the ominous news that: 

"A Federal Reserve report showed American industrial output was flat for a second consecutive month in March, held back by a 0.2 percent drop in manufacturing."

While the manufacturing index did show a 0.2 percent decline in March, its February reading was revised up by 0.5 percent. Therefore the March reading stood 0.3 percent from the advanced report for February and 0.6 percent above the February level. The reason that the industrial production index as a whole was flat over this period was a decline in mining output of approximately 3.8 percent. 

Comments (4)Add Comment
written by skeptonomist, April 18, 2012 8:15
How does utility output get classified under industrial production? A simple temperature index would probably eliminate quasi-seasonal variation in utility output.
¿What makes mining fluctuate madly?
written by John H. McCloskey, April 18, 2012 8:25
The gnomes are safely underground out of the weather, ¿no?

written by Ellis, April 18, 2012 8:57
How accurate is the manufacturing index? Many say that it includes a lot of content not produced in the U.S. Is this true?
written by Ron Alley, April 18, 2012 9:26
A simple temperature index would probably eliminate quasi-seasonal variation in utility output.

Actually, I doubt an accurate temperature index would be simple. Consumption of gas and electricity for heating and cooling depends on local, or at least regional, climate conditions. Further, the federal government has abandoned if not repealed the prohibition on utility holding companies. I do not know how a company such as Xcel Energy with utility company holdings in say Colorado and Minnesota reports energy output and consumption, but I suspect that might make quite a difference in constructing a simple temperature index.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.