EMU: Industrial Production

Thu Oct 12 04:00:00 CDT 2017

Consensus Actual Previous Revised
Month over Month 0.7% 1.4% 0.1% 0.3%
Year over Year 3.8% 3.2% 3.6%

Goods production (ex-construction) made further progress in August. Following an upwardly revised 0.3 percent monthly increase in July, output rose fully 1.4 percent, double market expectations and its best performance since last November. Annual workday adjusted growth climbed 0.2 percentage points to a very healthy 3.8 percent.

August's impressive monthly gain was reassuringly broad-based but led by capital goods where output soared some 3.1 percent. Durable consumer goods advanced 1.3 percent, intermediates 1.2 percent and energy 0.2 percent. Only consumer non-durables (0.0 percent) failed to register a rise.

Regionally, the headline change was dominated by Germany which saw a 3.0 percent monthly surge. Italy (1.2 percent) and Spain (1.1 percent) also fared well but France (minis 0.4 percent) struggled having been easily the best performer in July (1.0 percent).

Eurozone industrial production has now risen in five of the last six months. Average output in July/August was 1.0 percent above its mean level in the second quarter when it dipped 0.1 percent at a quarterly rate. Surveys of manufacturing also signalled a strong September so goods production looks all but guaranteed to make a significant contribution to last quarter's real GDP growth. Today's report will bolster speculation about a monetary policy recalibration at the ECB's next meeting on 26th October.

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.