GB: Industrial Production

Fri Apr 10 03:30:00 CDT 2015

Consensus Actual Previous Revised
IP-M/M 0.3% 0.1% -0.1%
IP-Y/Y 0.3% 0.1% 1.3% 1.2%
Mfg Output-M/M 0.4% 0.4% -0.5% -0.6%
Mfg Output-Y/Y 1.3% 1.1% 1.9% 1.7%

The goods producing sector was slightly weaker than anticipated in February although the key manufacturing sector largely lived up to expectations.

Total industrial production followed an unrevised 0.1 percent monthly dip at the start of the year with a 0.1 percent increase that saw annual growth slide from 1.2 percent to just 0.1 percent. However, manufacturing output expanded 0.4 percent versus January when it declined a marginally steeper revised 0.6 percent although this still reduced its yearly rise from 1.7 percent to 1.1 percent.

Within manufacturing, seven of the thirteen reporting subsectors posted monthly gains, led by transport equipment (1.6 percent) which alone added 0.2 percentage points to the change in total production. Other contributions were much smaller and for categories where output fell, the declines were only limited.

The goods producing sector as whole was hit by monthly falls in mining and quarrying (2.7 percent), where crude petroleum and natural gas slumped nearly 4 percent, and water supply, sewerage and waste (1.4 percent). However, electricity, gas, steam and air conditioning (1.2 percent) had a strong period.

Today's data put industrial production in the last three months 0.2 percent below September-November and manufacturing output just 0.1 percent higher. Both the CBI's Industrial Trends and manufacturing PMI surveys pointed to a much stronger performance which must raise the possibility of some positive revisions to the official data at some point. However, for now, with construction activity also falling 3.2 percent over the same period, a respectable print for first quarter real GDP looks to be dependent upon a particularly good period for the service sector.

Industrial production measures the physical output of the mining and quarrying, manufacturing, gas and electric, and water supply and sewerage sectors.

Industrial and manufacturing outputs are watched carefully by market participants despite the decline in the importance of manufacturing in the UK economy. Manufacturing output is the preferred number rather than industrial production which can be unduly influenced by electrical generation and weather. The manufacturing index is widely used as a short-term economic indicator in its own right by both the Bank of England and the UK government. Market analysts also focus on manufacturing and its sub-sectors to get insight on industry performance.

Industrial production accounts for less than 16 percent of the economy within which the key manufacturing sector is worth about ten percentage points. Total manufacturing is divided into thirteen sub-sectors, ranging from food, drink and tobacco through chemicals and chemical products to electronics and transport equipment. Consequently, 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.

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.