EMU: Industrial Production

Wed Mar 14 05:00:00 CDT 2018

Consensus Actual Previous Revised
Month over Month -0.4% -1.0% 0.4%
Year over Year 4.7% 2.7% 5.2% 5.3%

Eurozone industrial production began 2018 on a surprisingly soft note. Excluding construction, output fell a full 1.0 percent on the month following an unrevised 0.4 percent rise in December. This was its first decline since last September and easily its worst performance since December 2016. Annual workday adjusted growth slowed sharply from 5.3 percent to 2.7 percent.

A monthly 6.6 percent slump in energy production in respect of unseasonably warm weather did much of the damage but there were hefty declines too in both intermediates (1.0 percent) and durable consumer goods (1.9 percent). Partial offsets were provided by capital goods (1.2 percent) and, to a much lesser extent, consumer non-durables (0.1 percent).

Regionally, the monthly headline decline was led by France (minus 2.0 percent) and compounded by Spain (minus 2.5 percent). Germany (0.3 percent) at least reversed most of December's 0.4 percent drop while elsewhere the picture was very mixed.

January's unexpectedly steep fall puts Eurozone industrial production 0.4 percent below its average level in the fourth quarter when it rose a healthy 1.4 percent versus July-September (1.5 percent). February will most likely see a rebound but, in the absence of some sizeable revisions, goods production looks set to make a much smaller contribution to real GDP growth this quarter.

Industrial production measures the physical output of factories, mines and utilities. The measure provided by Eurostat excludes the volatile construction subsector for which data are 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.