Monday, February 12, 2007

USA Industrial Production-Manufacturing

Ronald Rutherford
This comes up all the time so I will post some of it again...
CFMMI Data Series shows the USA Industrial Production-Manufacturing.
From Federal Reserve Bank of Chicago, please note that in January 1973 the IPMFG (US Industrial Production-Manufacturing) was 43 and latest number was 115.2 for February 2007. Aside from seasonal fluctuations and the strong contraction that affected the overall economy in 2001 every year it has been going up.

For at least an example that you can understand, around 80% of the work force was involved in food production about 200 years ago. Now we employ somewhere around 1-2% of the work force in such endeavors. Do we produce more or less food stuffs now?


From: ISM Mfg Index

And a couple of recent articles on these issues:
Capacity utilization at 5-year high U.S. industrial production rises 0.6% in Dec.
U.S. May ISM rises to 55%, stronger than expected
Services expanding at best pace in more than year ISM nonmanufacturing index rises to 60.7% on broad-based gains
July 2007 Non-Manufacturing ISM Report On Business®

From one of the links:

"Excluding high-tech goods, factory output was flat in December."

Does this mean replacement missle and smart bomb systems are underway?

I'd like to know what the factory output is now. Is it still flat, increased, or declined?

The June report on ISM mfg. noted construction led the rise. August reports note declines as high as 80%+ in leading home-building construction firms....including the #1 builder. Things are either as rosy or they seem in the ageing reports, or they aren't. Time will tell.

Retired Monk
"Ideology is a disease"

It was also brought up on other discussions whether the index is adjusted for inflation.
Well at Industrial Production Explanatory Notes:
Coverage.The industrial production (IP) index measures the real output of the manufacturing, mining, and electric and gas utilities industries; the reference period for the index is 2002.
Just want to emphasize the real aspect vs. nominal levels, and:
Source data. 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. Data on physical products, such as tons of steel or barrels of oil, are obtained from private trade associations and from government agencies; data of this type are used to estimate monthly IP wherever possible and appropriate. Production indexes for a few industries are derived by dividing estimated nominal output (calculated using unit production or sales and unit values) by a corresponding Fisher price index; the most notable of these fall within the high-technology grouping and include computers, communications equipment, and semiconductors. When suitable data on physical product are not available, estimates of output are based on either production-worker hours or electric power use by industry. Data on hours worked by production workers are collected in the monthly establishment survey conducted by the Bureau of Labor Statistics. The factors used to convert inputs into estimates of production are based on historical relationships between the inputs and the comprehensive annual data used to benchmark the IP indexes; these factors also may be influenced by technological or cyclical developments. The annual data used in benchmarking the individual IP indexes are constructed from a variety of source data, such as the quinquennial Censuses of Manufactures and Mineral Industries and the Annual Survey of Manufactures, prepared by the Bureau of the Census; the Minerals Yearbook, prepared by the United States Geological Survey of the Department of the Interior; and publications of the Department of Energy.
So as best they can they count the real production levels. And if not they calculate by a variety of proxies and then reconcile with yearly reports.

Also interesting to note that seasonally adjusted numbers are based on employment mostly. Again a good gauge for short term calculations but needs and does have corrections in the system.

Wouldn't it be a rather simple and more accurate method just to ask medium-sized firms or better to submit a monthly 1 page memo stating how many units of their products they produced?

Surely, this would be a simple request and wouldn't take an army of statisticians to come to inconclusive results.

Wouldn't take an army in business to do it either. Just a five minute notation of what their output was for the month.

Direct input seems better. Non-direct input is how they came up with the nonsense that people earning less than $20,000 a year lived in their own $300,000 homes. Didn't know a McDonald's hamburger flipper did so well until the government told me about it.

I suppose the homeless should get off their duffs and use their begging money to get a $150,000 condo.

Retired Monk
"Ideology is a disease"



Post a Comment

Links to this post:

Create a Link

<< Home