Industrial Production Index

The release

How it is measured.

The compiler gathers output figures industry by industry, in physical units where they exist and estimated from hours worked or materials used where they do not, and weights each industry by its share of value added. The United States release also reports capacity utilisation: output as a share of what plants could sustainably produce.

Why markets watch it.

Industry is the part of the economy that swings most over a business cycle, so the index is used to date turning points. Capacity utilisation is read for how much room there is before production runs into limits.

How it is commonly misread.

In an economy made mostly of services it describes a minority of activity. Utilities’ output moves with the weather, so a cold or mild month can shift the total without anything changing in industry; the manufacturing line is the cleaner reading. Monthly figures, the euro area’s especially, are volatile and often revised.

An explanation of why the release is followed, not a view on what any market will do when it is published. Educational information, not investment advice or a recommendation to trade.