EMU: Industrial Production

Wed Jun 13 04:00:00 CDT 2018

Consensus Actual Previous Revised
Month over Month -0.7% -0.9% 0.5% 0.6%
Year over Year 1.7% 3.0% 3.2%

Goods production was weak in April. Following a marginally firmer revised 0.6 percent monthly rise in March, output (ex-construction) fell a surprisingly steep 0.9 percent, its fourth decrease since last November. Annual workday adjusted growth slowed from 3.2 percent to a sluggish 1.7 percent, less than half its rate at the start of the year.

April's monthly decrease was quite broad-based with just capital goods (1.9 percent) bucking the trend. Consumer durables were down fully 2.2 percent, non-durables 1.2 percent and intermediates 0.8 percent. Energy also posted a sharp decrease (5.0 percent).

Regionally it was a poor period for all of the four larger states. Hence, France saw a 0.6 percent monthly contraction while Germany was down 1.7 percent, Italy 1.2 percent and Spain 1.9 percent. Elsewhere the news was more mixed but hardly buoyant.

For the Eurozone as a whole, industrial production in April was a worrying 0.9 percent below its first quarter average. With the latest manufacturing PMI (55.5) signalling a further deceleration in business activity in May, prospects for the second quarter are not looking bright. Stronger GDP growth is likely to be dependent upon a pick-up in services but, so far, there has been little evidence of that. Today's report will not make it any easier for the ECB to announce any reduction in its QE programme tomorrow.

Industrial production measures the physical output of factories, mines and utilities. The measure provided by Eurostat excludes the volatile construction subsector for which data are released a few days later.

Industrial production measures changes in the volume of output for the EMU's member states. The industrial production index provides a measure of the volume trend in value added at factor cost over a given reference period, excluding VAT and other similar deductible taxes. The preferred number is industrial production excluding construction. As with other EMU statistics, the data are provided by the national statistics offices to Eurostat (the European Union statistical agency) where it is combined to produce an overall output measure.

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.