What Is the Industrial Production Index (IPI)?

The industrial production index (IPI) is a monthly economic indicator measuring real output in the manufacturing, mining, electric, and gas industries, relative to a 澳洲幸运5官方开奖结果体彩网:base year.

It is published in the middle of every month by the 澳洲幸运5官方开奖结果体彩网:Federal Reserve Board (FRB) and reported on by the 澳洲幸运5官方开奖结果体彩网:Conference Board, a member-driven economic think tank. The FRB also re🍷leases𒊎 revisions to previous estimates at the end of every March.

How Does the Industrial Pro💞duction Index (IPI) Work?

The industrial production index (IPI) measures levels of production in the manufacturing, mining—including oil and gas field drilling services—and electrical and gas utilities sectors. It also measures capacity, an estimate of the production levels that could be sustainably maintained; and 澳洲幸运5官方开奖结果体彩网:capacity utilization, the ratio of actual output to capacity.

Calculating the IPI

Industrial production and capacity levels are expressed as an index level rel🎶ative to a base year—currently 2012. In other words, they do not express absolute production volumes or values, ꦜbut the percentage change in production relative to 2012.

The source data is varied, including physical inputs and outputs such as tons of steel; 澳洲幸运5官方开奖结果体彩网:inflation-adjusted saleꦍs figures; and,൲ in some cases, hours logged by production workers. The FRB obtains this data from industry associations and government agencies and aggregates them into an index using the Fisher-ideal formula.

Within the overall IPI, there are a number of sub-indices providing a detailed look at the output of highly specific industries. Examples of a few of the dozens of industries for which m🍨onthly production data is available include: residential gas sales, ice cream and fro🐈zen dessert, carpet and rug mills, spring and wire products, pig iron, audio and video equipment, and paper.

Benefits of the Industrial Prod♑uction Index (IPI)

Industry-level data are useful for managers and investors within specific lines of business, while the composite index is an important macroeconomic indicator for 澳洲幸运5官方开奖结果体彩网:economists and investors—fluctuations within the industrial sector account for most of the variation in overall 澳洲幸运5官方开奖结果体彩网:economic growth.

At the same time, IPI differs from the most popular measure of economic output, 澳洲幸运5官方开奖结果体彩网:gross domestic product (GDP): GDP measures the price paid by the end-user, so it includes value-added in the retail sector, which IPI ignores. It is also important to note that the 澳洲幸运5官方开奖结果体彩网:industrial sector makes up a low and falling share of the U.S. economy—less than 20% of GDP as of 2🔯016. 

Capacity utilization is a useful indicator of the strength of demand. Low capacity utilization, or 澳洲幸运5官方开奖结果体彩网:overcapacity, signals weak demand. Policymakers could read this as a signal that 澳洲幸运5官方开奖结果体彩网:fiscal or monetary stimulus is needed. Investors, meanwhile, could interpret it as a sign of a coming downturn, or—depending on t💖he signals from Washington—as a sign of coming stimulus.

High capacity utilization, on the other hand, can act as a warning that the economy is overheating, suggesting the risk of 澳洲幸运5官方开奖结果体彩网:price rises and asset bubbles. Policymakers could react to those threats with interest rate rises or fiscal austerity. Alternatively, they could let the 澳洲幸运5官方开奖结果体彩网:business cycle take i𝄹ts course, likely resulting in an eventual recession.

Historical Data

Below is the seasonally-adjusted IPI for the 50 years to October 2017. Data is﷽ available going back to January 1919.