|Month over Month||0.3%||-0.8%||-0.1%||0.0%|
|Year over Year||0.6%||-0.8%||0.6%||0.7%|
Industrial production (ex-construction) was surprisingly weak in July. A 0.8 percent monthly fall followed a slightly stronger revised unchanged reading in June to reduce annual output growth from 0.7 percent to also minus 0.8 percent, its first negative print since April.
July's monthly decrease was the steepest since last October but still masked an even sharper 1.0 percent drop in manufacturing. Most of the major subsectors saw production contract including particularly hefty declines in electronics and machines (2.0 percent), transport equipment (1.6 percent) and food and agriculture (1.1 percent). In fact, with the other manufactured goods category down 0.7 percent, the overall picture would have looked a good deal worse but for a 4.6 percent jump in the volatile refining subsector. Construction was up 1.0 percent but this followed a 1.9 percent drop in June.
The latest data put July industrial production (ex-construction) 0.7 percent below its average level in the second quarter when it dropped also 0.7 versus January-March. Indeed, output has only recorded positive monthly growth once since February. Accordingly, with the sector PMI (48.3) pointing to a further, and more marked, deterioration in activity rates in August, it looks as if goods production will subtract from real GDP growth this quarter.
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.
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