DE: Industrial Production

Tue Jan 09 01:00:00 CST 2018

Consensus Actual Previous Revised
Month over Month 1.7% 3.4% -1.4% -1.2%
Year over Year 5.7% 2.7% 2.8%

The goods producing sector had an exceptional November. Following the disappointingly sharp (albeit smaller revised) 1.2 percent monthly decline in October, output surged fully 3.4 percent in mid-quarter, the steepest rise since September 2009. Annual growth was 5.7 percent, more than double the 2.8 percent posted percent last time.

November's buoyancy reflected broad-based gains but capital goods led the way with a 5.7 percent spurt. Consumer goods advanced 3.6 percent and intermediates 3.0 percent while construction was up 1.5 percent. In fact, the headline data would have been stronger still but for a 3.1 percent contraction in energy.

Average goods production in October/November was 0.6 percent above its mean level in the third quarter. Even a flat month would now yield a quarterly increase in excess of 1 percent and with all the December surveys very bullish, a very significant contribution from the sector to fourth quarter real GDP growth seems assured. Even better, full order books argue for continued strength at the start of 2018.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are collected from companies in the sector with fifty or more employees and include mining and quarrying, manufacturing, energy and, in contrast to its Eurozone counterpart, construction.

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 manufacturing orders data, the production index has the advantage of being available in a timely manner giving a more current view of business activity. Those responding to the data collection survey account for about 80 percent of total industrial production. Like the PPI and the orders data, construction is excluded.

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.