FR: Industrial Production

Tue Nov 10 01:45:00 CST 2015

Consensus Actual Previous Revised
Month over Month 0.1% 0.1% 1.6% 1.7%
Year over Year 2.5% 1.8% 1.6% 1.5%

Industrial production (ex-construction) edged up just 0.1 percent on the month in September. The increase, which followed a minimally stronger revised 1.7 percent spurt in August, matched expectations and lifted annual growth of output from 1.5 percent to 1.8 percent, its best reading since May.

Manufacturing was slightly weaker, posting no monthly change although this came after a hefty 2.2 percent spike last time. Even so, it was a 22.4 percent jump in the volatile coke and refined petroleum products category that prevented an outright contraction as food and beverages fell 0.2 percent, transport equipment 1.5 percent and the other manufacturing subsector 0.7 percent. The only other increase was in electronics and machinery (1.8 percent).

The latest figures put third quarter industrial production (ex-construction) 0.4 percent above its second quarter level and so point to a small positive contribution to the period's GDP growth (flash data due Friday). Nonetheless, this would essentially just reverse the second quarter drop and masks a disappointingly small 0.1 percent gain in manufacturing.

Looking into October, the manufacturing PMI was just flat at a less than impressive 50.6 while INSEE's business climate indicator dipped slightly. The fourth quarter will probably see another rise in goods production but risks to the latest GDP growth forecast from the Bank of France (0.4 percent) are probably on the downside.

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.