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IP Index (Industrial Production Index) is the indicator characterizing industrial output in mining, manufacturing, energy-savings and utilities. Industrial production index index reflects growth or decline in manufacture and services in the USA without account of construction segment. It is also known as “net output” and is expressed as percentage.
Industrial production takes about 40% of the US economy and is closely related with such figure as GDP. Advantage of index is that it only accounts for industrial output rather than its monetary value. It makes the index one of major indicators of national economy condition and an important fundamental influencing currency rate. Growth of indicator means consolidation of the economy and contributes to upsurge of the American currency.
Index embraces 225 clustered branches of economy and each of them includes enormous number of industrial enterprises. Data is based on recordings of workbooks containing number of worked hours in the industry segment. Total volume for every month is expressed as percentage from gross production in comparison with previous year. Apart from that, the Federal Reserve System calculates production diffusion index, which is equal to percentage of branches experienced industrial growth for the last month.
Another economic indicator is inseparably associated with IPI - Capacity Utilization (CU). CU represents ratio of total industrial output to potential total capacity of branches.
IP index is published monthly at 2.15 p.m (GMT) on every 15th date by the Federal Reserve System (Board of Governors of the Federal Reserve System) and shows the change in relation to the previous month. Impact on the Forex market: moderate.
IP serves as a reliable figure for monitoring trade cycle. Figures above expected are taken as positive for dollar and below expected – as negative. Often index value is analyzed along with the National Association of Purchasing Managers index (NAMP Index) and Unemployment Rates, because growth of industry leads to decrease of unemployment and, as the result, to rise in income of enterprises, their stock indexes and finally, growth of GDP.
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