DE: Industrial Production

Fri Mar 09 01:00:00 CST 2018

Consensus Actual Previous Revised
Month over Month 0.4% -0.1% -0.6% -0.5%
Year over Year 5.5% 6.7% 6.4%

German industry had a surprisingly poor January. Production contracted a further 0.1 percent on the month, its fourth fall in the last five months, following a marginally smaller revised 0.5 percent decline in December. Annual growth decelerated from 6.4 percent to 5.5 percent.

January's monthly dip was largely attributable to intermediates where output decreased 1.2 percent. Energy was also down a hefty 3.3 percent while construction was off 2.2 percent. More promisingly, there were fresh gains in both capital goods (1.4 percent) and consumer goods (2.0 percent) and excluding energy, production rose 0.6 percent.

The January data leave overall goods production 0.5 percent above its average level in the fourth quarter when it grew 0.9 percent versus July-September. However, on the same basis, manufacturing was up a healthy 1.4 percent, a 0.3 percentage point increase on its fourth quarter rate.

In other words, the underlying trend remains very positive and on course to make another useful contribution to real GDP growth this quarter. The rate of expansion may be slowing but, on current evidence, not by much.

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.