DE: Industrial Production

Wed Feb 07 01:00:00 CST 2018

Consensus Actual Previous Revised
Month over Month -1.0% -0.6% 3.4% 3.1%
Year over Year 6.7% 5.7% 5.4%

Industrial production held up better than expected in December. A 0.6 percent monthly decline only slighted dented November's smaller revised, but still hefty, 3.1 percent surge to see annual output growth climb from 5.4 percent to 6.7 percent.

The monthly year-end fall was led by capital goods which were down 2.6 percent. Consumer goods (minus 0.5 percent) similarly had a poor month but intermediates bucked the trend with a 1.5 percent advance. Energy was also up 1.4 percent but construction decreased 1.7 percent.

Despite December's setback, industrial production still expanded at a respectable 0.7 percent quarterly rate in the final quarter of the year. This was down from 1.1 percent in the third quarter but in line with a very healthy underlying trend. Moreover, with manufacturing orders continuing to climb sharply in December and the sector PMI (61.1) close to its record high last month, the signs are that the first quarter of 2018 will be another very good period for German industry.

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.