IT: Industrial Production

Tue Apr 10 03:00:00 CDT 2018

Consensus Actual Previous Revised
Month over Month 0.8% -0.5% -1.9% -1.8%
Year over Year 2.5% 4.0% 4.4%

The goods producing sector had another poor month in February. Excluding construction, output fell a further 0.5 percent versus January when it declined a marginally smaller revised 1.8 percent. Annual workday adjusted growth was 2.5 percent, down sharply from 4.4 percent last time.

In line with the results seen across much of the Eurozone, weakness was broad-based with the notable exception of energy. This was boosted by a period of exceptional cold and jumped fully 8.1 percent on the month. However, the same factor will have contributed, probably in no small way, to fresh declines in consumer goods (2.4 percent), capital goods (1.0 percent) and intermediates (1.5 percent).

The poor February results put average industrial production in the first two months of the year 0.5 percent below the fourth quarter mean. March will need to show a monthly 1.6 percent bounce just to prevent a first quarter contraction. Bad weather has been a feature in all of the Eurozone's national industrial production releases in February. The region's full report is due Thursday and will be similarly impacted. To this end, while there was clearly a marked slowdown in Eurozone goods production last quarter, the extent of the underlying deceleration is uncertain. The March report should make things a little clearer.

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.