What is it?
This report has two components: Industrial Production and Capacity Utilization. Industrial Production is a measure of the physical output of US factories, mines, and utilities. The utilities component can be quite volatile, because weather changes create wide swings in the level of demand for utilities. Capacity Utilization is calculated by taking the above Industrial Production figure and dividing it into overall production capacity.
This report frequently moves markets. Many consider the data timely and useful. They see the Industrial Production number as a key factory sector indicator, and they look to the Capacity Utilization figure as a reliable indicator of inflation. The thinking is that as Capacity Utilization increases (especially above 85%), more inflationary pressure is placed on the economy as available production "slack" is removed.
Many others disagree, however, and they do not trust the report 100%. Primarily, these detractors say that actual capacity is impossible to estimate reliably. This would make the Capacity Utilization number suspect in their eyes, and they rely on additional supporting data beyond the report in order to draw conclusions.
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