EMU: Industrial Production

Tue Apr 14 04:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.3% 1.1% -0.1% -0.3%
Year over Year 0.8% 1.6% 1.2% 0.4%

The goods producing sector (ex-construction) proved a good deal more robust than generally expected in February. Although January's monthly decline was steepened to 0.3 percent, a mid-quarter bounce of 1.1 percent was the strongest since April last year and large enough to lift annual workday adjusted output growth from 0.4 percent to a relatively healthy 1.6 percent.

February's monthly jump was reassuringly broad-based. Hence, capital goods and durable consumer goods posted 1.0 percent gains while non-durables climbed fully 1.6 percent. Intermediates lagged but still managed a 0.3 percent increase while energy was up 1.1 percent.

Importantly too, all of the big four member states saw production expand versus January. France was up a modest 0.2 percent but Germany (0.6 percent), Italy (also 0.6 percent) and Spain (0.7 percent) recorded respectable increases and for the two southern economies, their steepest rises in at least five months.

The latest figures put average Eurozone industrial production in January/February 0.7 percent above its mean level in the fourth quarter when it rose only 0.4 percent. This bodes well for first quarter real GDP growth and is another reason for expecting an unusually optimistic, albeit probably still cautious, tone at tomorrow's ECB post-meeting press conference.

This indicator measures the physical output of factories, mines and utilities for the 19 EMU members. The measure preferred by the ECB excludes construction which is released a few days later.

Industrial production measures changes in the volume of output for the EMU's member states. The industrial production index provides a measure of the volume trend in value added at factor cost over a given reference period, excluding VAT and other similar deductible taxes. The preferred number is industrial production excluding construction. As with other EMU statistics, the data are provided by the national statistics offices to Eurostat (the European Union statistical agency) where it is combined to produce an overall output measure.

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.