EMU: Industrial Production

Wed Sep 13 04:00:00 CDT 2017

Consensus Actual Previous Revised
Month over Month 0.0% 0.1% -0.6%
Year over Year 3.4% 3.2% 2.6% 2.8%

The Eurozone's goods producing sector had a subdued July. Excluding construction, output was up just 0.1 percent on the month, broadly in line with expectations but hardly denting the unrevised 0.6 percent drop posted in June. Still, favourable base effects saw annual growth recover 0.4 percentage points to 3.2 percent.

Production was held in check by monthly falls in energy (1.2 percent) and non-durable consumer goods (0.4 percent). These largely masked decent gains in capital goods (0.8 percent), consumer durables (0.7 percent) and intermediates (0.5 percent).

For the big four states it was a mixed period with monthly decreases in Germany (0.1 percent) and Spain (0.4 percent) contrasting with advances in France (0.6 percent) and Italy (0.1 percent). Elsewhere, it was a similarly unsettled picture.

The July data put Eurozone industrial production just 0.1 percent above its average level in the second quarter when it jumped fully 1.2 percent versus January-March. This may provide early warning signs of a slowdown in third quarter real GDP growth but it is early days yet and business surveys were bullish about manufacturing developments in August. The ECB should not be concerned.

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.