DE: Industrial Production

January 9, 2017 01:00 CST

Consensus Actual Previous Revised
Month over Month 0.6% 0.4% 0.3% 0.5%
Year over Year 2.1% 1.2% 1.6%

Goods production rose a slightly weaker than expected 0.4 percent on the month in November. However, the shortfall in mid-quarter was effectively compensated for by an upward revision to the October gain which now stands at 0.5 percent. Annual growth was 2.1 percent, up from 1.6 percent last time and the strongest reading since August.

The monthly headline increase was largely attributable to intermediates which posted a healthy 0.9 percent advance. Consumer goods (0.3 percent) also made progress but capital goods dipped 0.1 percent albeit after a 1.0 percent jump in October. Elsewhere energy fell 0.4 percent while construction rose 1.5 percent. Overall manufacturing output expanded 0.4 percent for a second successive month.

The latest data put average industrial production in October/November 0.7 percent above its mean level in the third quarter when it climbed only 0.3 percent versus April-June. This is consistent with an expected acceleration in fourth quarter real GDP growth. November manufacturing orders (minus 2.5 percent) were weak but a still solid rising trend and robust sector PMI (55.6) bode well for output in December.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are collected from companies in the sector with fifty or more employees and include mining and quarrying, manufacturing, energy and, in contrast to its Eurozone counterpart, construction.

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.

Like the manufacturing orders data, the production index has the advantage of being available in a timely manner giving a more current view of business activity. Those responding to the data collection survey account for about 80 percent of total industrial production. Like the PPI and the orders data, construction is excluded.

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.