Industrial Production Index (IP) is a measure of output of the industrial sector of the economy and includes manufacturing, mining and utilities. It accounts for the bulk of the variation in national output over the course of the business cycle, making it an important tool for forecasting economic performance and a popular economic indicator for many manufacturers. There is no shortage of IP news and reports, and the measure is analyzed and used as a benchmark in many information sources, even Twitter, for example in this recent IP Twitter post.
NFPA also offers IP news sources from Oxford Economics via our NFPA’s Global Market Reports & Forecasts webpage. In a more recent article, Data Insights – US – Industrial Production – August 2020, Oxford Economics examined the August 2020 activity in IP and included their opinions surrounding future growth of IP despite the challenges of the COVID-19 pandemic.
Industrial production index data is collected and published by the Federal Reserve Board (FRB) through the G.17 program, along with related capacity indexes and capacity utilization rates. The industrial production index measures real output and is expressed as a percentage of real output in a base year, currently 2012. On a monthly basis, the individual indexes of industrial production are constructed from two main types of source data: (1) output measured in physical units and (2) data on inputs to the production process, from which output is inferred. The first estimate of output for a given month is published around the 15th of the following month. The estimate is preliminary and subject to revision in each of the subsequent five months as new source data become available.
FRB IP Resources
While many users of IP data are only aware of the most commonly used form of IP, Total U.S. Industrial Production, the FRB also offers a large variety of IP data sets for many industry sectors, giving users a deep dive into the industrial production output for whichever sectors are most important to their company’s business planning.
FRB experts also provide guidance regarding their IP data series with a monthly summary report, Current Release, which emphasizes the latest monthly additions to the IP data series. The FRB takes a detailed look at how various market and industry groups are reflected in the IP data series, along with a general summary of the latest monthly IP data point and how each industrial sector affected it.
While the FRB provides a valuable resource with the IP data series, navigating the IP data sets requires a certain level of familiarity in the FRB’s data set layout to find the IP data series you’re most interested in. NFPA’s IP resources have done all this work for you.
NFPA IP Resources
NFPA familiarizes itself with those cryptic coding systems, confusing data layouts, and ancient data formats that so many government and public data sources tend to use, just so we can extract, organize, and release this same data in a user-friendly format as an exclusive benefit of membership.
Access to non-seasonally-adjusted key customer market and economic indicator data series such as IP data sets are available via NFPA’s Customer Market File (CMF) on the NFPA website. The CMF is a monthly file containing data and trend graphs for key U.S. customer markets, popular economic indicators and producer pricing that can be used for your own internal analysis needs or easily transferred into analytical tools such as NFPA’s Stats Toolkit.
For members that prefer seasonally-adjusted data formats, these type of IP data sets can be found in NFPA’s Trends in Capacity Utilization, along with analysis of capacity utilization data from the FRB on a variety of different customer markets and general indicators every quarter.
NFPA’s IP Support Tools
Take your analysis to the next level with NFPA’s Stats Toolkit and examine the strength of the relationship between your company data and IP data to discover just how reliable this indicator is. The Correlation Analysis Report, one of five custom data analysis/visualization tools in the Stats Toolkit, helps users explore lead/lag and correlation analysis to recognize relationships between two data series. This report not only identifies the correlation percentage between data series for a specific date range, but also applies a monthly lead/lag effect. When shifting one data series forward (in monthly increments) to the cross-corelated data series, members can discover if the correlation percentage strengthens or weakens to possibly reveal a leading indicator for another data series.
Above is an example of the Correlation Analysis Report as we examine the 90-month relationship between Total Fluid Power shipments (TFP) and IP. In this example, we will use three types of U.S. Industrial Production Indexes, Total, Manufacturing, and Machinery. The three “correlation analysis with lags chart” first displays that as we narrow our focus concerning IP data, the relationship strengthens between TFP and IP. Secondly, the “correlation analysis with lags chart” identifies the highest correlation (95.7%) occurs when the leading series (IP: Machinery) has a 0-month lead/lag effect applied, or no lead at all.
The Correlation Analysis Report can also generate a trend graph that applies no lead to the leading series (IP: Machinery) for visual confirmation of the relationship between the two data series.
With a little assistance from NFPA’s market information resource benefits, anyone engaged in the fluid power supply chain can access the data and tools they need to confidently evaluate the relationship between their company and IP data.
NFPA’s timely and accurate industry statistics allow our members to understand trends and anticipate change with a variety of industry reports, forecasts and data sources for fluid power products, customer markets and economic indicators.
Questions? Contact Eric Armstrong, NFPA’s Economic and Statistical Programs Manager, at firstname.lastname@example.org or (414) 778-3372.
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