Industrial Production and Capacity

The last major metric moving the morning[1] is industrial production and capacity, a look at how much our[2] factories are producing and how many of our factories are involved in that production. The market likes this because, let's face it, a nation depends on production of actual goods to be competitive and useful in the world. For December, industrial production was up 0.8% and the capacity utilization rate hit a level of 76.0%. The analysts are feeling guardedly optimistic for January, predicting a 0.5% increase in production and the capacity utilization rate rising to 76.3%.

The Federal Reserve, in their report, has chosen to rain on the analyst's parade. On the up side, they revised December industrial production upwards to 1.2%. On the down side, January industrial production actually fell 0.1% while the capacity utilization rate slipped 20 bps to a level of 76.1%. So no real joy there.

[1] Whee! Alliteration!

[2] And by "our" I mean "US".

Everything Is More Expensive, But CPI And Industrial Production Will Still Be Counted A "Win"

We've got two major market movers for today - Consumer Price Index (CPI) and Industrial Production. The first tells us the overall change in the cost of living for consumers (i.e. everyone) and the second tells us about the rate of change in, well, industrial production.

Last month[1], the CPI was up a moderate 0.2%[2] while industrial production showed us a whopping 0.00% change. Will things be better this month? Let's find out.

Analysts were expecting an additional month of 0.2% increase in CPI (with a 0.1% increase in the core), and 0.4% increase in industrial production (with a capacity utilization rate of 75.1%). The reality?

The reality for the Consumer Price Index is a 0.1% increase, with the same increase showing up even after excluding food and energy costs. Groceries (well, "food at home") saw a 0.2% increase, while eating out saw a 0.3% increase. Energy costs went up across the board, with a 0.7% increase in gasoline costs, and a 4.2% increase in fuel oil costs.

And Industrial Production? Up 0.4%, with capacity utilization at 75.2%. Most of the losses came from final products, specifically consumer goods final products (down 0.5%), while business equipment and nonindustrial supplies were the big winners (each category up 0.9%).

All in all, the market will see this as a minor win. Both measures beat expectations, after all. Just try not to think too hard about how things are 1.1% more expensive than November 2009.

[1] October. These are lagging indicators, after all.
[2] Or 0.00% if you look at "core" CPI. I won't rehash that argument today.

Industrial Production: Meh

The industrial production figures are out for October, and they aren't quite what the Street wanted. Remember, we were looking for a 0.3% increase in production and a 74.9% capacity utilization rate. Instead, we got a 0.0% month-over-month change in production and a capacity utilization rate of 74.8%.

In other words: meh.

There was good news in the "final products" major market group, which saw the 0.3% increase the Street was looking for (mostly driven by the business equipment subgroup, which saw a 1.1% increase in production). This was easily counterbalanced the nonindustrial supplies group production dropping 0.4% and the materials group production dropping 0.1%.

Have a look at the actual results at http://www.federalreserve.gov/releases/g17/current/default.htm.

Apple Will Change The World! Oh, and there's some reports due out as well.

First off, Apple Computers (www.apple.com) started promising last night that "Tomorrow is just another day. That you'll never forget." The smart people at the WSJ and Reuters are expecting an announcement that the Beatles discography will be available on iTunes - this is apparently big news (if true) because there has never been a legal way to get electronic copies of any song by the Beatles.

I can't say I'm all that impressed myself, but I've never been a huge fan of the Beatles. And, since AAPL is down $2 or so in premarket trading, I don't think the Street is all that impressed either.

But away with humdrum corporate shilling! We have metrics to review!

First out of the gate is the Producer Price Index (aka PPI), which is a measure of how much the costs to produce goods has changed. If you think of it as manufacturing inflation, you won't be far off the mark. Two different PPI measures really get looked at: overall PPI and core PPI (which looks at the change in costs while excluding the ever-volatile and obviously unimportant food and energy production costs; how much could they really matter, after all).

September saw a month-over-month PPI change of 0.4%, with "core" PPI increasing 0.1%. For October, the analysts are anticipating a 0.8% increase in PPI, with another lone 0.1% increase in the "core" PPI. Obviously, they are expecting food production costs, energy production costs, or both to spike.

At 9 AM we get Industrial Production. This is a measure of, well, how much our industries produce as an increase or decrease from the previous month. It also looks at something called the capacity utilization rate, which measures how much of the possible productivity of our industries is actually being used. September saw a 0.2% decrease in month-over-month production, and a capacity utilization rate of 74.7%. For October, the Street is looking for a 0.3% increase in production and a utilization rate of 74.9%.

And then, at 10 AM, we get Apple's official word on what their world-changing announcement is. Remember, you will never forget this day.