Economists, analysts, and investors look to the Industrial Production and Capacity Utilization report for timely indications of overall economic health as well as manufacturing and inflationary trends. The two main sections of the report provide different types of information and signals.

The index of industrial production is procyclical—that is, it moves in unison with the business cycle. As the chart in FIGURE 4.4 illustrates, the correlation between the index and economic activity is quite tight—so tight, in fact, that the monthly index is used as a more timely proxy for the quarterly GDP report.

Figure 4.4 Industrial Production and Real GDP

Sources: Federal Reserve Board; U.S. Department of Commerce, Bureau of Economic Analysis; National Bureau of Economic Research