IT: Industrial Production

Fri Nov 10 03:00:00 CST 2017

Consensus Actual Previous Revised
Month over Month -0.4% -1.3% 1.2%
Year over Year 2.4% 5.7% 5.8%

Industrial production (ex-construction) was very weak in September. Following an unrevised 1.2 percent monthly spike in August, output slumped fully 1.3 percent, its worst performance since January. Annual growth more than halved to 2.4 percent, a 5-month low.

The monthly headline decline was dominated by energy where output was off some 6.3 percent. However, intermediates contracted a sizeable 3.0 percent and capital goods were down 2.0 percent. Only consumer goods (0.4 percent) managed positive monthly growth thanks to a 4.7 percent jump in durables.

Nonetheless, despite September's surprisingly sharp setback, the third quarter was still a very decent period for Italian manufacturing. Indeed, overall industrial production was up a healthy 1.4 percent versus April-June when it advanced 1.2 percent. This bodes well for third quarter GDP (data due next Tuesday). Even so, the fourth quarter will start from a weak base and will need to see a marked improvement just to keep output flat.

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.