EMU: Industrial Production

Tue Nov 14 04:00:00 CST 2017

Consensus Actual Previous Revised
Month over Month -0.8% -0.6% 1.4%
Year over Year 3.4% 3.3% 3.8% 3.9%

Following a very strong August, industrial production (ex-construction) gave back some ground in September. However, a 0.6 percent monthly decline was smaller than market expectations and left intact a solid upward trend. Annual growth was 3.3 percent, down from 3.9 percent last time.

September's weakness was predictably broad-based with most subsectors posting partial reversals of the sizeable monthly gains made in August. Capital goods were down 1.6 percent, consumer durables 0.9 percent and intermediates 0.6 percent. With energy also off 0.9 percent, it was only consumer non-durables (0.1 percent) that managed any rise.

Regionally, September was a mixed month with hefty monthly declines in output in Germany (1.8 percent) and Italy (1.3 percent) contrasting with a decent gain in France (0.6 percent) and flat production in Spain.

The September data mean that third quarter Eurozone industrial production was 1.1 percent above it level in the second quarter when it increased 1.2 percent. Manufacturing PMIs and other surveys of business confidence suggest that the fourth quarter should not be far behind.

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.