FR: Industrial Production

June 9, 2017 01:45 CDT

Consensus Actual Previous Revised
Month over Month 0.2% -0.5% 2.0% 2.2%
Year over Year 0.6% 2.1% 2.5%

Goods production (ex-construction) unexpectedly fell in April. A 0.5 percent monthly decline followed a stronger revised 2.2 percent bounce in March and reduced annual output growth from 2.5 percent to just 0.6 percent.

Disappointingly, the monthly headline drop was more than matched in manufacturing where production was down 1.2 percent, albeit after a larger revised 2.8 percent spurt last time. Weakness was quite broad-based with particularly hefty reversals in transport equipment (6.2 percent) and machinery (1.6 percent) alongside falls in food and drink (0.7 percent) and the other manufactured goods category (0.2 percent). Indeed, without a 9.2 percent jump in coke and refined petroleum the report would have looked even softer. However, mining and quarrying, energy, water supply and waste management saw a 4.4 percent gain and construction was up 3.4 percent.

Today's data are much weaker than suggested by the PMI and INSEE surveys so there could be scope for a positive revision in June. Nonetheless, as it stands, industrial production was 0.4 percent above its average first quarter level. The trend in output remains up but perhaps not quite as robustly as previously thought.

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.