Monthly production data for South Korea show manufacturing output fell sharply in December, with construction and public sector output also weakening sharply and the service sector contracting for the fourth consecutive month. Previously published PMI survey data showed that the manufacturing sector contracted for the sixth consecutive month in December and at a more pronounced pace than in November, with PMI data for January due to be published later this week.

South Korea's index of industrial production fell 2.9 percent on the month in December after advancing 0.6 percent in November, while year-over-year growth weakened from a fall of 3.4 percent to a decline of 7.3 percent. Within the industrial sector, manufacturing output fell 3.5 percent on the month after a previous increase of 0.8 percent, while year-over-year growth weakened from a fall of 3.3 percent to a decline of 8.0 percent.

Growth was also weak in other key sectors. Output in the public administration sector weakened from an increase of 3.7 percent on the month in November to a fall of 1.1 percent in December, output in the construction sector dropped 9.5 percent after increasing 2.7 previously, and service sector output fell 0.2 percent after a previous decline of 0.3 percent. Aggregating across all industry, output fell 1.6 percent on the month in December after increasing 0.4 percent in November, with year-over-year growth weakening from an increase of 1.2 percent to a fall of 0.8 percent.

The industrial production index measures changes in the volume of industrial production with respect to the base year. The index charts the growth in production of each major industry and of the manufacturing sector. Industrial Production measures the physical output of the nation's factories, mines, and utilities. Factories manufacture various products, and the industrial production indexes have been prepared as a comprehensive indicator of wide-ranging production activities for such products and are regarded as some of the most important among economic indexes.

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.

Industrial production provides key industry data for export-dependent economies. It is highly sensitive to the business cycle and can often predict future changes in employment, earnings and income. For these reasons industrial production is considered a reliable leading indicator that conveys information about the overall health of the economy. 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. Detailed data in the report shows which sectors of the economy are growing and which are not.