EMU: Industrial Production

August 14, 2018 04:00 CDT

Consensus Actual Previous Revised
Month over Month -0.5% -0.7% 1.3% 1.4%
Year over Year 2.5% 2.4% 2.6%

Eurozone goods producers had a poor end to the second quarter. Excluding construction, output fell a slightly steeper than expected 0.7 percent on the month, already its fourth decline of the year. May's surge was revised a tick stronger (1.4 percent) but at 2.5 percent, annual workday adjusted growth was the second weakest so far in 2018

June's monthly slide was worryingly broad-based and would have been steeper still but for a 0.5 percent gain in energy. Capital goods slumped an ominously large 2.9 percent while intermediates were off 0.5 percent and consumer durables and non-durables 0.4 percent and 0.6 percent respectively.

Regionally, weakness was particularly apparent in Germany where production fell a monthly 0.6 percent. By contrast, France (0.6 percent) and Italy (0.5 percent) recorded respectable gains but Spain (minus 0.7 percent) struggled.

The June setback put second quarter Eurozone industrial production a disappointing 0.2 percent below its level in the first quarter when it fell 0.6 percent. In other words, Eurozone goods producing industries are now in technical recession. If the manufacturing PMI (55.1) is anything to go by, July saw some improvement but slowing orders are a major worry in particular, export demand which apparently saw its smallest rise since August 2016. The third quarter could be problematic.

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.