DE: Industrial Production

Fri Mar 06 01:00:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.5% 0.6% 0.1% 1.0%
Year over Year 0.8% -0.4% 0.6%

The goods producing sector began 2015 on a solid footing with output rising 0.6 percent on the month. Although the increase was much as expected, December's minimal 0.1 percent advance was revised up to fully 1.0 percent and seasonally and workday adjusted annual growth climbed from 0.6 percent to 0.8 percent, its highest mark in three months.

However, the improvement in the headline data masked a much less impressive composition and the key manufacturing category saw production only flat at December's level. Capital goods rose a respectable 0.5 percent on the month but intermediates fell 0.4 percent as did consumer goods. Rather, overall growth was led by the more volatile construction subsector where output jumped fully 5.0 percent. Energy was unchanged.

Still, the latest figures, combined with the sizeable historical revisions, leave a much brighter picture of overall German industrial production and January alone shows growth of 1.3 percent versus its fourth quarter average (manufacturing 0.9 percent). That said, the PMI surveys remain much more cautious about recent developments and the near-4 percent nosedive in January orders reported yesterday warns of a potential setback at some point. Manufacturing is in recovery mode but the steepness of its trajectory is unclear at this stage.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are collected from companies in the sector with fifty or more employees and include the construction sector.

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 will not 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 manufacturing orders data, the production index has the advantage of being available in a timely manner giving a more current view of business activity. Those responding to the data collection survey account for about 80 percent of total industrial production. Like the PPI and the orders data, construction is excluded.

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.