IT: Industrial Production

July 11, 2017 03:00 CDT

Consensus Actual Previous Revised
Month over Month 0.3% 0.7% -0.4% -0.5%
Year over Year 2.8% 1.0% 0.9%

Goods production (ex-construction) rebounded surprisingly sharply in May. A 0.7 percent monthly increase was the steepest rise since February and, following a marginally larger revised 0.5 percent decline in April, lifted annual workday adjusted growth from 0.9 percent to 2.8 percent, its second best reading so far this year.

May's upturn was dominated by capital goods which saw a 2.3 percent monthly bounce that easily more than reversed April's 1.6 percent drop. January was very weak (minus 5.6 percent) but this subsector has been one of the bright spots in recent months. By contrast, intermediates compounded April's 0.5 percent slide with a fall of 0.4 percent, the first back-to-back decrease since May/June 2016. Consumer goods edged just 0.2 percent firmer while energy dipped 0.1 percent.

Despite the positive mid-quarter data, the recovery in Italian industrial production remains very sluggish. Average output in April/May was 0.4 percent above the first quarter mean but May alone was still nearly 22 percent short of its pre-Great Recession peak back in August 2009. Still, the manufacturing PMI (55.2) signalled a decent June and the strongest quarterly sector performance in more than six years. Real GDP growth last quarter looks likely to have been reasonably respectable.

Industrial production measures the physical output of the nation's factories, mines and utilities. Construction is excluded. Approximately 4,100 companies provide data on more than 8,000 monthly flows of 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 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 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.