FR: Industrial Production

December 9, 2016 01:45 CST

Consensus Actual Previous Revised
Month over Month 0.6% -0.2% -1.1% -1.4%
Year over Year -1.8% -1.1%

Goods production failed to recover as expected in October. Following a slightly steeper revised 1.4 percent monthly fall in September, output (ex-construction) declined a further 0.2 percent to reduce annual growth from minus 1.1 percent to minus 1.8 percent.

Manufacturing saw a 0.6 percent monthly contraction, in large part reflecting a 2.3 percent slide in food and agriculture. The other manufactured goods category also recorded a 1.3 percent drop but there were sizeable gains in coke and refined petroleum products (2.1 percent), machinery and equipment (2.2 percent) and transport equipment (1.1 percent). Construction was up 2.1 percent, more than reversing September's 1.7 percent decrease.

October's surprise contraction leaves overall industrial production 0.3 percent below its average level in the third quarter. Output has now fallen in five of the last six months and annual growth would look a lot weaker but for a 2.4 percent monthly spike in August. November's manufacturing PMI (51.7) hinted at a modest pick-up in mid-quarter and INSEE's business climate survey found sentiment still above its long-run average. Nonetheless, at this stage the central bank's newly released forecast for 0.4 percent fourth quarter GDP growth is looking somewhat optimistic.

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 cause misleadingly large short-term swings in total industrial production.

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.