Industrial production increased in November
Fed's statement moved Treasuries for the week ending December 19 (Part 4 of 9)
Output rises
Industrial production increased 1.3% in November 2014. This is the fastest pace since the 1.6% increase recorded in May 2010. Industrial production includes manufacturing, mining, and utilities. For October, production was revised to show a gain of 0.1%. This is up from the 0.1% decline that was previously reported.
Production from industries indicates economic health. If industries are doing well, it signals inherent strength in the economy—especially for industrialized countries like the US. ETFs—like the SPDR Industrial Select Sector Fund (XLI), the SPDR Dow Jones Industrial Average ETF (DIA), and the SPDR Utilities Select Sector Fund (XLU)—closely monitor this monthly report.
Broader market ETFs—like the SPDR S&P 500 ETF (SPY) and the iShares Core S&P 500 ETF (IVV)—are also boosted due to the implications of a stronger industrial sector.
Details
The strongest gain was seen in utilities. Utilities increased 5.1% from October. This was due to colder-than-usual weather for November. This raised demand for heating. Manufacturing increased 1.1% from October. It’s up 4.8% from a year ago. Among the major market groups, all three—final products, non-industrial supplies, and materials—posted growth month-over-month. Consumer goods increased 2.5% from October. This is the largest rise since August 1998.
Capacity utilization
Capacity utilization measures the level of industries’ resource utilization. A low percentage signals slack. US industries were utilizing 80.1% of their capacity in November—up from 79.3% in October. The indicator has been broadly rising. As seen in the above graph, it read the highest since March 2008.
Mining was using 87.9% of its capacity in November. It was followed by petroleum and coal products. They were using 86.3% of capacity. Non-metallic mineral products were on the lower end. They were using 64.8% of capacity.
In the next part of this series, we’ll look at how housing starts fared in November.
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