FR: Industrial Production

Fri Mar 09 01:45:00 CST 2018

Consensus Actual Previous Revised
Month over Month 0.0% -2.0% 0.5% 0.2%
Year over Year 1.2% 4.5% 3.9%

Goods production was unexpectedly weak in January. Excluding construction, output slumped fully 2.0 percent on the month and that after a smaller revised 0.2 percent rise in December. This was the worst performance since June 2011 and saw annual growth slide from 3.9 percent to 1.2 percent, its lowest print since last April.

A 6.7 percent monthly nosedive in energy and extracted goods on the back of unseasonably warm weather did much of the damage but manufacturing was also down a sizeable 1.1 percent. This was its second consecutive decline. Refining (minus 0.8 percent) had a negative impact but it was the other manufactured goods category (minus 2.7 percent) that subtracted the most. Elsewhere the news was rather better with gains in both food (1.4 percent) and electronics and machines (1.4 percent). That said, construction (minus 7.6 percent) more than reversed December's 5.2 percent bounce.

The January data are in sharp contrast to the upbeat picture painted by manufacturing PMI (and INSEE survey) and without revision, warn of a potentially significant slowdown in goods production this quarter. With output in January some 1.9 percent below its average level in the fourth quarter, February/March will need to see a particularly robust increase just to keep the quarter flat.

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.