EMU: Industrial Production

January 12, 2017 04:00 CST

Consensus Actual Previous Revised
Month over Month 0.5% 1.5% -0.1% 0.1%
Year over Year 1.6% 3.2% 0.6% 0.8%

Industrial production (ex-construction) expanded surprisingly sharply in November. A 1.5 percent monthly jump was well ahead of market expectations and, following a slightly stronger revised gain in October, enough to lift annual workday adjusted growth from 0.8 percent to 3.2 percent.

Outside of a 0.1 percent dip in durable consumer goods, all of the major categories posted fresh monthly advances. Intermediates (1.6 percent) and consumer non-durables (2.9 percent) were especially robust as was energy (1.2 percent). By contrast, capital goods edged just 0.1 percent firmer.

Amongst the larger Eurozone states, Germany (0.3 percent) was relatively soft as monthly rises in France (2.2 percent), Italy (0.7 percent) and Spain (1.7 percent) were all significantly larger. Only Greece and Portugal (both minus 0.9 percent) failed to make ground and increases elsewhere were typically sizeable.

If business surveys are anything to go by, the Eurozone's November recovery in output picked up some steam in December and healthy order books point to more of the same this quarter. Indeed, even a flat performance would make for a fourth quarter increase of 1.3 percent. If so, it may be that the lagging goods producing sector is finally starting to catch up with its services counterpart. The implications for a much better balance to the economic recovery would bode well for prospects in 2017 and would certainly not damage the ECB's chances of getting inflation back up towards its near-2 percent medium-term target.

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.