The
U.S. output, measured in quantity of material produced, is measured
monthly in the Federal Reserve’s report, the Industrial Production
Index. It’s based on a three wide areas: manufacturing, electric and gas
utilities, and mining. Some of the report is based on hard data
reported directly from certain industries, but this isn’t always the
case due to data availability.
There are literally hundreds of components to this index, which are then compiled and reported as a level of the index. For example, May 2017’s index level was 105.0. It is expressed as the current output against a base year, which, at time of writing, is 2007. Therefore, the May 2017 output levels were 5 percent higher than the average level of 2007.
Though manufacturing is a sector that only makes up approximately 20 percent of the U.S. economy, because it is responsible for a huge amount of change in the United States’ output, forex traders closely watch it. In addition, it is considered pro-cyclical, meaning that there is a correlation between the movements of the index and that of the business cycle. Some analysts even use this report as an early indicator of the GDP.
There are literally hundreds of components to this index, which are then compiled and reported as a level of the index. For example, May 2017’s index level was 105.0. It is expressed as the current output against a base year, which, at time of writing, is 2007. Therefore, the May 2017 output levels were 5 percent higher than the average level of 2007.
Though manufacturing is a sector that only makes up approximately 20 percent of the U.S. economy, because it is responsible for a huge amount of change in the United States’ output, forex traders closely watch it. In addition, it is considered pro-cyclical, meaning that there is a correlation between the movements of the index and that of the business cycle. Some analysts even use this report as an early indicator of the GDP.