Industrial Production

The Industrial Production (IP) index measures the real output of all manufacturing, mining, and electric and gas utility establishments located in the United States, the reference period for the index is 2007.

Manufacturing consists of those industries included in the North American Industry Classification System, or NAICS. For the period since 1997, the total IP index has been constructed from 312 individual series based on the 2007 North American Industrial Classification System (NAICS) codes.

These individual series are classified in two ways: (1) market groups, and (2) industry groups. Market groups consist of products and materials. Total products are the aggregate of final products, such as consumer goods and equipment, and nonindustrial supplies (which are inputs to nonindustrial sectors). Materials are inputs in the manufacture of products.

Major industry groups include three-digit NAICS industries and aggregates of these industries-for example, durable and non-durable manufacturing, mining, and utilities. A complete description of the market and industry structures, including details regarding series classification, relative importance weights, and data sources, is available on the Board's web site.

The capacity index, which is an estimate of sustainable potential output, is also expressed as a percentage of actual output in 2007. The production indexes are computed as Fisher indexes since 1972; the weights are based on annual estimates of value added. The rate of capacity utilization equals the seasonally adjusted output index expressed as a percentage of the related capacity index.

Steel Market Update tracks these series because they are a useful comparison with other measures of the health of manufacturing such as the ISM manufacturing index, manufacturing employment and durable goods orders. By comparing multiple data sources that relate to the same subject and indirectly to steel demand we believe we can obtain a relatively unbiased view of a major sector of steel consumption.

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