FR: Industrial Production

Wed Jun 10 01:45:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.3% -0.9% -0.3% 0.0%
Year over Year 1.0% -0.1% 1.3% 1.8%

Goods production (ex-construction) was surprisingly weak in April. Although March's previously reported decline was revised away, it was followed by a hefty 0.9 percent monthly contraction that left output 0.1 percent below its level a year ago. This was the first negative annual growth rate since December 2014.

Outside of a 0.2 percent increase in electronics and machines, all of the major subsectors posted monthly falls. Refining (10.8 percent) was particularly soft and transport (3.3 percent) also recorded a sizeable reversal. The other manufactured goods category dropped 0.6 percent as did energy and extracted goods while food was off 0.1 percent. As a result, overall manufacturing output declined 1.0 percent after a 0.5 percent increase in March. Construction also decreased 0.8 percent.

April's slide left headline production 0.7 percent below its first quarter average and so makes for downside risk to second quarter real GDP growth. Earlier this week the national central bank left unrevised its forecast of a 0.3 percent increase in total output this quarter. Thanks to what should be a stronger service sector this is still quite possible but April's setback in manufacturing underlines the fragility of the French economic recovery.

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.