Industrial Production & Capacity Utilization

The Industrial Production index gauges the physical volume of the nation's manufacturing output including factories, mines, and utilities. The goods-producing sector accounts for about 45% of the economy while the service and construction sectors represent the remaining 55% (not covered here). 

The IP index is expressed as a percentage of production using 1987 as the base year. The data is measured as an increase or decrease from the prior month.

Capacity Utilization 

Also released at the same time is the "capacity utilization report" which measures how the nation's capital is used in the production of goods. This utilization rate rises and falls typically following business cycles. When production increases, capacity utilization also rises.

Capacity utilization is viewed closely for signs of inflationary  pressures. It is generally believed by economists that when utilization exceeds 82% -  85%, pricing pressures increase resulting in inflation.

A slower production pace is favorable to the bond market while a strong production and capacity utilization report feeds a market sell-off.

Manufacturing & Trade Inventories