Trade Desk Thoughts - Industrial Production

Industrial Production (Sep) Actual -2.8%, Expected -0.7%, Previous -1.1%

Capacity Utilization (Sep) Actual 76.4%, Expected 78.0%, Previous 78.7%

Release Explanation: The total value of the output from mines, industrial factories and utilities is in the Industrial read. The value of manufactured goods is in the Manufacturing read. The Shipment number covers the amount sent abroad. Capacity Utilization cover at what rate Factories are running at compared to the maximum. High production numbers usually denote an economy in an upwards trend, or growth period. These reports are reactive to change and are well respected. GDP will normally be directly affected by the Industrial Production component. Durable Goods and Retail Sales will normally be affected by the Manufacturing aspect of the report. A currency will eventually be affected by these numbers, but only once they filter through to the main releases.

Trade Desk Thoughts: The combination of hurricanes, a strike at Boeing, and the continuing effects of the credit crunch caused industrial production to fall by the most in nearly 34 years in September. September's hurricanes in the Gulf region accounted for 2.25 percentage points of the decline. Utility production rose 2.2% while mining output (which includes oil drilling) decreased 7.8%. Motor vehicle and parts production increased 1.9% while production of consumer durable goods (vehicles, furniture and electronics) fell 0.7%.

"Industrial Production and Capacity Utilization are two metrics used by the National Bureau of Economic Research (NBER) to date recessions," said Matthew Carniol, chief currency strategist at TheLFB-forex.com. "The fall in both measures increases the risk the NBER will date a recession as having begun in the third quarter."

Forex Technical Reaction: Stocks are moving slightly higher. USD/JPY is holding steady but EUR/USD and GBP/USD are declining.

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