DE: Industrial Production

Fri Jun 08 01:00:00 CDT 2018

Consensus Actual Previous Revised
Month over Month 0.2% -1.0% 1.0% 1.7%
Year over Year 2.0% 3.2% 3.9%

Goods production was surprisingly weak in April. Although the monthly rise in March was revised up by 0.7 percentage points to a healthy 1.7 percent, this was more than reversed with a 1.0 percent, drop, the third decline in the last five months. Annual growth slowed from 3.9 percent to 2.0 percent.

In fact, the monthly headline decrease would have been steeper but for a 3.3 percent bounce in construction. Elsewhere, capital goods were down 1.3 percent, consumer goods 2.1 percent and intermediates 2.0 percent. As a result, manufacturing output contracted 1.7 percent and so fully unwound March's 1.6 percent gain. There was also a 1.6 percent fall in energy.

Today's report leaves overall industrial production in April 0.5 percent below its first quarter average (manufacturing minus 1.2 percent) and at its lowest level since September last year. With business surveys pointing to a further deceleration in May and new orders growth still falling, the second quarter is not shaping up well.

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.