FR: Industrial Production

Wed Jan 10 01:45:00 CST 2018

Consensus Actual Previous Revised
Month over Month -0.4% -0.5% 1.9% 1.7%
Year over Year 2.5% 5.5%

Goods production excluding construction gave back some ground in November but still only dented a smaller revised increase in October. Output declined a much as expected 0.5 percent on the month following a 1.7 percent spurt at the start of the quarter. With November 2016 a particularly strong month, annual growth slowed misleadingly sharply from 5.5 percent to 2.5 percent.

That said, manufacturing was rather softer, registering a 1.0 percent monthly fall, albeit after a hefty 2.5 percent spike last time. Weakness was most apparent in electronics and machinery (minus 3.7 percent) and the other manufactured goods category (minus 1.3 percent). Food and agriculture (minus 0.7 percent) also struggled but there were further gains in transport equipment (3.2 percent) and refining (1.9 percent). Elsewhere, there was a rebound in energy and extracted goods (3.1 percent) while construction (minus 0.5 percent) reversed October's advance.

Despite November's setback, average industrial production in the first two months of the fourth quarter was an impressive 2 percent above its mean level July-September. Even flat output in December would yield a quarterly increase of some 1.9 percent. The goods producing sector will have made a sizeable contribution to what should have been, a very good quarter for French economic growth.

Industrial production measures the physical output of the nation's factories, mines and utilities. Manufacturing is seen as the best guide to underlying developments as some sectors can be very volatile and cause misleadingly large short-term swings in total industrial 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 won't 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.