EMU: Industrial Production

Tue Jul 14 04:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.2% -0.4% 0.1% 0.0%
Year over Year 2.0% 1.6% 0.8% 0.9%

Industrial production unexpectedly fell in May. Following a downwardly revised flat reading in April, output excluding construction dropped 0.4 percent on the month, its second decline since February. Annual workday adjusted growth was 1.6 percent, up from 0.9 percent last time but only due to favourable base effects.

However, weakness in May was largely a function of the energy sector where production decreased a monthly 3.2 percent, its third decline in as many months. Although non-durable consumer goods (minus 1.4 percent) again struggled, there were gains in capital goods (1.0 percent), durable consumer goods (0.4 percent) and intermediates (0.1 percent).

Regionally, the headline decline was dominated by the smaller member states and masked modest gains for most of the larger countries. Hence, France registered a 0.3 percent monthly advance, Italy was up 0.9 percent and Spain 0.4 percent. Germany was only flat but this followed a 0.8 percent increase in April. Elsewhere, Greece compounded April's 1.9 percent drop with a 5.1 percent slump, Ireland was down 6.9 percent and Estonia off 1.5 percent.

The latest figures put average Eurozone industrial production in April/May 0.1 percent below its first quarter average and means, in the absence of any revisions, output will need to rise 0.6 percent in June for the second quarter just to match the previous period's level. To this end, last month's manufacturing PMI (52.5) was moderately optimistic but the signs are that respectable second quarter Eurozone GDP growth will need a solid performance by the service sector.

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.