Today's Economic Indicator Report
09/25/1995

From 09/16/1995
This morning the Board of Governors of the Federal Reserve System released its August report on Industrial Production. Today's report contained an upward revision for the Index of Industrial Production numbers for May, June, and July and announced that in August the index rose to a new high of 123, a whopping increase of 1.1 percent with respect to the revised July figure and 3.2 percent higher than a year ago.

The Index of Industrial Production is a measure of everything coming out of U.S. factories, the nation's pipelines and powerlines, and various and sundry holes in the ground. It includes durable and nondurable manufactured goods and materials including: automobiles, appliances, furniture, food, clothing, tobacco, metals and paper. It also includes the output of coal mines and oil and gas wells and the sale of electricity.

The Index of Industrial Production is one of four indicators selected by the Department of Commerce as components of its composite index of coincident indicators. Historically, the cyclical turning points in the coincident index have occurred at about the same time as turning points in aggregate economic activity.

From the end of the 1990-91 recession to February of this year the Index of Industrial Production trended generally upward, at an average rate of 4.9% per year. Between February and June (based on today's revised numbers) the index dropped slightly downward from a peak of 122.1 to a value of 121.2. The index seemed to be suggesting that an economic slowdown was occurring. Well, the revised July number (121.6) and the newly-announced August number (123.0) torpedoed that theory.

Manufacturing output increased 1 percent, led by sharp gains in the output of motor vehicles and related parts and materials; most other industries also posted production increases. The output of utilities surged nearly 5 percent further as the heat wave continued; mining output decreased 1.4 percent, more than reversing the gain in July.

University of Michigan Consumer Sentiment Report for September

45 minutes after the Fed release, the University of Michigan reported its consumer sentiment index for September. This month's number was 88.9, a drop-off of almost 8% from last month's number. Recent values for the index were:

April May June July August September

92.5 89.8 92.3 94.4 96.5 88.9

So, following a three-month uptrend, the index was slammed back down to almost one percent below the value in May.

How did all this affect the markets? For the bond market it was a bad news/good news day. Bond futures sold off, as would be expected, on the big uptick in the Industrial Production index. Bonds recovered later on the news that consumers were less confident about their economic future. At the end of the day the 30-year T-bond was down 6/32 at 105 7/32 for a yield of 6.47%. Stocks also edged slightly lower. The DJIA closed down 4.23 at 4797.57.

Pat Ellis

Transmitted: 95-09-16 23:42:09 EDT