EMU: Industrial Production

Wed Apr 13 04:00:00 CDT 2016

Consensus Actual Previous Revised
Month over Month -0.7% -0.8% 2.1% 1.9%
Year over Year 1.3% 0.8% 2.8% 2.9%

Excluding construction, Eurozone industrial production fell a marginally steeper than expected 0.8 percent on the month in February. However, this reversed only a fraction of January's (downwardly revised) 1.9 percent jump. Even so, with base effects quite markedly negative, annual workday adjusted growth was only 0.8 percent, a 2.1 percentage point drop versus the rate at the start of the year

In the same way that January's surge was broad-based February's setback reflected monthly declines in all of the major subsectors bar intermediates where output was only flat. The worst performer was non-durable consumer goods which saw a 1.8 percent contraction but energy (minus 1.2 percent) also had a poor month. By comparison, capital goods (minus 0.3 percent) and consumer durables (minus 0.4 percent) held up relatively well.

Regionally the majority of member states recorded monthly falls led by Ireland, although a 10.5 percent nosedive here followed a 14.5 percent leap in January. Germany (minus 0.7 percent) did much of the damage but with output in France (minus 1.0 percent), Italy (minus 0.6 percent) and Spain (minus 0.2 percent) weak too, the larger four countries all lost ground.

Despite February's reversal, average Eurozone industrial production in the first two months of 2016 was still a healthy 1.1 percent above its fourth quarter mean. Indeed, ignoring any revisions, it would take a further monthly drop of at least 2.8 percent in March to prevent the goods producing sector providing a boost to last quarter's real GDP growth. That said, even if the first quarter looks to have been quite respectable, industry could still struggle in the current period amidst signs of decelerating new business.

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.