|Month over Month||0.3%||1.5%||-0.3%||-0.2%|
|Year over Year||-1.2%||-0.1%||-2.6%||-2.8%|
Excluding construction industrial production rose a surprisingly sharp 1.5 percent on the month in December and that after a slightly smaller revised 0.2 percent fall in November. Annual growth was minus 0.1 percent, a marked improvement on the previous month's minus 2.8 percent rate.
The monthly gain in overall production was broad-based and while a 3.4 percent spike in refining dominated, there were solid rises too in transport equipment (2.9 percent), food and agriculture (1.5 percent) and electronics and machinery (1.2 percent). With the other goods subsector expanding 0.8 percent, manufacturing output was up a healthy 1.2 percent and so easily more than reversed its 0.5 percent drop in mid-quarter. Elsewhere, energy and extracted goods production climbed 2.8 percent and construction advanced 0.4 percent.
The December data are much more buoyant than implied by the manufacturing PMI survey. However, following earlier weakness, they still make for a fourth quarter decline in industrial production of 0.4 percent after a 0.7 percent quarterly rise in the July-September period. As such, the goods producing sector will have subtracted from fourth quarter GDP growth (flash estimate due Friday). The national central bank's new forecast puts first quarter total output 0.4 percent above its fourth quarter level but on current trends, and notwithstanding today's surprisingly bullish report, the risks must be on the downside.
Industrial production measures the physical output of the nation's factories, mines and utilities. Manufacturing is seen as the best guide to underlying developments as some sectors can be very volatile and have a misleading impact on the total industrial production reading.
Investors want to keep their finger on the pulse of the economy because it usually dictates how various types of investments will perform. The stock market likes to see healthy economic growth because that translates to higher corporate profits. The bond market prefers more subdued growth that won't lead to inflationary pressures. By tracking economic data such as industrial production, investors will know what the economic backdrop is for these markets and their portfolios. Like the PPI and the orders data, construction is excluded from the data. This report has a big influence on market behavior. In any given month, one can see whether capital goods or consumer goods are growing more rapidly. Are manufacturers still producing construction supplies and other materials? This detailed report shows which sectors of the economy are growing and which are not.
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