EMU: Industrial Production

Mon Sep 14 04:00:00 CDT 2015

Consensus Actual Previous Revised
Month over Month 0.3% 0.6% -0.4% -0.3%
Year over Year 0.7% 1.9% 1.3% 1.5%

Excluding construction, July goods production rose 0.6 percent on the month to stand a workday adjusted 1.9 percent above its level a year ago. The stronger than expected gain followed a marginally smaller revised 0.3 percent monthly drop in June and was the first increase since April's minimal 0.1 percent rise.

July's headline advance was supported by a 3.0 percent monthly bounce in energy output but there were healthy performances too in capital goods (1.4 percent) and consumer durables (1.3 percent). However, it was not all positive news as both intermediates and consumer non-durables contracted 0.6 percent.

Regionally, all of the larger four countries bar France made a respectable contribution to the overall monthly Eurozone rise. Hence, German production was up 0.5 percent, Italy 1.1 percent and Spain 0.6 percent. By contrast, France posted a 0.8 percent drop and that after a 0.2 percent decline in June. Amongst the smaller members there were marked rises in Ireland (7.2 percent), Greece (4.3 percent) and Latvia (2.8 percent).

July's data leave Eurozone industrial production just 0.2 percent above its average level in the second quarter when it dipped 0.1 percent. However, if the sector PMI is anything to go by, while overall activity rates were little changed, August manufacturing output saw its strongest growth since May 2014. That said, the survey was still pointing to an annualised quarterly rise of only around 2 percent, hardly enough to suggest a convincing trend rate of expansion.

Goods production should provide a boost to third quarter Eurozone real GDP growth but any upside surprises will probably have to come from services.

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.