DE: Industrial Production

Tue May 08 01:00:00 CDT 2018

Consensus Actual Previous Revised
Month over Month 0.8% 1.0% -1.6% -1.7%
Year over Year 3.2% 2.4% 2.1%

March was a much better month for German goods production. Output rose a slightly stronger than expected 1.0 percent on the month, its best performance since last November and enough to lift annual growth from 2.1 percent to 3.2 percent. However, the end of quarter bounce only reversed a part of February's marginally steeper revised 1.7 percent decline.

March's partial monthly recovery was reasonably broad-based. Hence, capital goods climbed 2.6 percent after a 2.7 percent drop, consumer goods were up 1.1 percent following a 1.4 percent decline and construction gained 0.6 percent after a 3.1 percent nosedive. However, intermediates compounded a 0.7 percent fall with a further 0.6 percent decrease. This made for a 1.1 percent rise in manufacturing output which similarly failed to fully unwind February's 1.7 percent slump. Energy continued to expand, rising 1.4 percent.

The March data were firm enough to leave first quarter industrial production unchanged from its level in the fourth quarter when a 0.9 percent increase provided solid underpinning for overall economic growth. Over the same period, manufacturing was up just 0.1 percent following a 0.9 percent advance. looking ahead, a 2.1 percent quarterly contraction in growth of new orders at the start of the year does not bode particularly well for second quarter output.

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.