EMU: Industrial Production

Fri Jun 12 04:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.4% 0.1% -0.3% -0.4%
Year over Year 0.6% 0.8% 1.8% 2.1%

The goods producing sector began the second quarter on a surprisingly soft note. A 0.1 percent monthly rise in production (ex-construction) was comfortably short of expectations and followed a steeper revised 0.4 percent decline in March. As a result, annual workday adjusted output growth dropped from 2.1 percent to 0.8 percent, its slowest pace since January.

However, April's minimal monthly rebound would have been rather more impressive but for a 1.6 percent slide in energy. Elsewhere there were gains in intermediates (0.3 percent), capital goods (0.7 percent) and consumer durables (1.0 percent). Non-durable consumer goods were down 0.8 percent but, apart from this category, all sectors reported increases versus a year ago.

Amongst the larger member states output rose a solid 0.8 percent on the month in Germany but there were falls in France (1.0 percent), Italy (0.3 percent) and Spain (0.1 percent). Elsewhere Finland, already technically in recession, only saw output stagnate following a cumulative 2.4 percent loss since the end of last year while Greece (also back in recession) posted a hefty 2.3 percent reversal.

April's advance leaves Eurozone industrial production just 0.1 percent above its average level in the first quarter when it increased fully 0.9 percent versus October-December. This provides early warning of a probable smaller contribution from the sector to real GDP this quarter and so underscores the need for the ECB to see out its QE programme in full.

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.