IT: Industrial Production

Mon Jun 11 03:00:00 CDT 2018

Consensus Actual Previous Revised
Month over Month -0.7% -1.2% 1.2%
Year over Year 1.9% 3.6% 3.5%

Industrial production (ex-construction) fell a hefty and much sharper than expected 1.2 percent on the month in April. This fully reversed March's unrevised bounce and slashed annual workday adjusted growth from 3.5 percent to 1.9 percent, the worst performance since April last year.

Outside of capital goods, which saw a 0.7 percent monthly gain, weakness was broad-based. Hence, consumer goods were down 1.3 percent and intermediates 1.1 percent while energy slumped some 4.8 percent.

The April data put overall production 0.6 percent below its first quarter average and equalling its lowest level since October 2017. To make matters worse, the May manufacturing PMI (52.7) found both output and new orders growth slowing to their worst rates since October 2016. Accordingly, not only does May look likely to have been another soft month but the near-term outlook also shows no improvement.

Taken together with the monthly falls already reported in both France (0.5 percent) and Germany (1.0 percent), Wednesday's full Eurozone industrial production report will probably at least unwind March's 0.5 percent gain.

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.