Industrial production matched expectations for a 0.2 percent monthly fall in November but back revisions meant that annual growth of minus 5.1 percent was more than 2 percentage points steeper than the market consensus. The latest monthly contraction was the eighth in a row and left production 2.5 percent below its pre-Covid-19 level in February 2020.

Manufacturing output was weaker still, posting a surprisingly sharp 0.5 percent monthly fall that erased much of October's 0.7 percent gain. Six of its 13 subsectors made negative contributions, notably pharmaceuticals (0.3 percentage points) and chemicals (0.1 percentage points).

Elsewhere within industrial production, electricity and gas fell 0.4 percent but mining and quarrying rose 2.8 percent and total water supply 0.2 percent.

Ignoring revisions, December's industrial production will need an improbably large monthly increase of at least 2.4 percent if the sector is not to subtract from fourth quarter GDP growth. However, today's update also puts the ECDI at minus 3 and the ECDI-P at 5, both measures indicating that overall economic activity is performing much as expected.

After no change in October, industrial production in November is expected to fall 0.2 percent. Manufacturing output is also seen 0.2 percent lower.

Industrial production measures the physical output of the mining and quarrying, manufacturing, gas and electric, and water supply and sewerage sectors. Manufacturing is seen as the best guide to underlying developments as the other subsectors can be highly volatile on a short-term basis. Estimates are largely based on a monthly business survey of roughly 6,000 companies.

Industrial and manufacturing outputs are watched carefully by market participants despite the decline in the importance of manufacturing in the UK economy. Manufacturing output is the preferred number rather than industrial production which can be unduly influenced by electrical generation and weather. The manufacturing index is widely used as a short-term economic indicator in its own right by both the Bank of England and the UK government. Market analysts also focus on manufacturing and its sub-sectors to get insight on industry performance.

Industrial production accounts for less than 16 percent of the economy within which the key manufacturing sector is worth about ten percentage points. Total manufacturing is divided into thirteen sub-sectors, ranging from food, drink and tobacco through chemicals and chemical products to electronics and transport equipment. Consequently, 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.

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 won't 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.