Industrial Production and Capacity Utilization - G.17
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This page provides additional information about data in the Board of Governors’ statistical release on Industrial Production and Capacity Utilization (G.17). Most of the information is of a technical nature and represents answers to questions that may be of interest to a range of analysts and researchers. The page will be updated as such questions arise.
Documentation for the statistics in the G.17 release is available on the About page.
Q. How were the effects of Hurricane Sandy on industrial production calculated?Posted: 11/16/2012
A. In the G.17 release from November 16, 2012, it was reported that the disruptions related to Hurricane Sandy subtracted nearly 1 percentage point from the rate of change in industrial production. The effect of Hurricane Sandy on industrial output was estimated using the same procedures employed to assess the effects of previous natural disasters.
For some industries, timely high-frequency physical product data that reflect the imprint of natural disasters on industrial output exist. For other industries, estimates of natural-disaster effects are constructed using the following methodology. First, information from the Federal Emergency Management Agency (FEMA) is used to determine which counties were affected by the disaster; FEMA issues Major Disaster Declarations and Emergency Declarations based on the needs of the counties. Second, the U.S. Census Bureau’s County Business Patterns data are used to measure each industry’s share of employment located in the affected counties. Third, the duration that facilities in the affected areas were idled is estimated based on the declaration type assigned to each county by FEMA. Fourth, given this information, an estimate of the magnitude of the disruption is constructed for each industry, and the industry-specific effects are aggregated using industrial production weights to obtain an overall estimate of the effect on top-line industrial production and on the major industry aggregates. In subsequent months, as physical product data and other information become available, the disaster effects are further updated and refined.
Related information on estimating disaster effects on industrial production can be found in a Federal Reserve Bulletin article from 2009.
Q. In the G.17 press release for both September and October, it was mentioned that precautionary idling of production in late August along the Gulf of Mexico in anticipation of Hurricane Isaac likely reduced the rate of change in industrial production in August by 0.3 percentage point.
The press release for October stated, "...part of the rise in September is a result of the subsequent resumption of activity at idled facilities."
Why was the "bounceback" in September not quantified?
A. It is much more straightforward to estimate the initial reduction in the rate of change in industrial production (IP) that results from a natural disaster, such as a hurricane, than it is to quantify the effect on IP of the subsequent recovery in the affected geographic areas. The reason is that the initial shock to output is much more focused in time and is much more likely to be apparent in the source data used to estimate IP, while the recovery can either be quick or be very drawn out (such as after the hurricanes in 2005 and in 2008). As a result, the post-disaster recovery is more easily confounded in the data by other events occurring at the time including, for example, any shifting of production to unaffected producers.
The methods used to estimate IP are independent of the amount of activity that is attributed to a post-disaster recovery. In other words, different assumptions about the pace at which affected producers resume operations would lead to different estimates of the portion of current activity attributable to the recovery, but the level of IP would be largely invariant to those assumptions.