FR: Industrial Production

Tue Apr 10 01:45:00 CDT 2018

Consensus Actual Previous Revised
Month over Month 1.5% 1.2% -2.0% -1.8%
Year over Year 4.0% 1.2% 1.4%

Industrial production rebounded in February. However, an otherwise solid 1.2 percent monthly jump (excluding construction) reversed only a portion of January's smaller revised 1.8 percent slump and manufacturing output even posted another decline. With base effects strongly positive, annual production growth was 4.0 percent, up from 1.4 percent last time.

In fact, the mid-quarter bounce was mainly due to energy and extracted goods which recorded fully an 11.5 percent monthly leap on the back of exceptionally cold weather (which probably helped to depress output elsewhere). The equally volatile refining subsector was also up a sizeable 1.9 percent while food and agriculture advanced 0.7 percent. However, transport equipment nosedived 2.8 percent and electronics and machines were even weaker at minus 3.2 percent. With the other manufactured goods category increasing just 0.3 percent, this left overall manufacturing output down 0.6 percent versus January and 0.7 percent lower over the latest three months.

Elsewhere, a 2.8 percent spurt in construction only dented January's 7.5 percent drop.

Consequently, even after the improvement in February, average industrial production in January/February fell 1.2 percent versus its mean level in the fourth quarter. Ignoring revisions, March will need an improbable 3 percent spurt just to keep first quarter output flat. Accordingly, it looks very likely that goods production will have subtracted from French GDP growth at the start of the year. Even allowing for bad weather effects, the sector seems to have shifted down a gear.

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.