IT: Industrial Production

Mon Mar 19 04:00:00 CDT 2018

Consensus Actual Previous Revised
Month over Month -0.5% -1.9% 1.6% 2.1%
Year over Year 4.0% 4.9% 5.4%

Industrial production (ex-construction) slumped at the start of the year. A 1.9 percent monthly decline was the second steepest since December 2015 and all but reversed a stronger revised 2.1 percent bounce in December. Annual workday adjusted growth was 4.0 percent, down from 5.4 percent last time.

However, the monthly drop was in no small way impacted by a 7.0 percent nosedive in energy output. Elsewhere, the picture was not quite so weak. Hence, although capital goods (minus 1.6 percent) and intermediates (minus 0.9 percent) had a poor period, consumer goods were at least flat. Nonetheless, January's surprisingly poor report left overall production 0.3 percent below its fourth quarter average and warns of a much smaller contribution to first quarter GDP growth. Fourth quarter industrial production was up a solid 0.9 percent versus July-September.

That said, the trend in output remains positive and confidence in Italian manufacturing is at reasonably healthy levels. Any slowdown in activity this quarter should be relatively modest.

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.