Industrial production fell 1.1 percent on the month in December. Following a stronger revised 1.4 percent rise in November and with base effects negative, the decline reduced annual growth from 2.8 percent to minus 1.7 percent, its first negative print since last July. Output was just 0.9 percent above its pre-pandemic level in February 2020.

December's monthly setback was broad-based and would have been more marked but for a 1.3 percent increase in energy. Capital goods fell 0.4 percent, consumer durables 1.4 percent, non-durables 1.0 percent and intermediates a hefty 2.8 percent

Regionally, most member states recorded monthly declines. However, amongst the larger four, France saw a 1.1 percent advance while Italy was up 1.6 percent and Spain 0.7 percent. Consequently, it was Germany (minus 2.1 percent) that did much of the damage.

Today's update leaves fourth quarter Eurozone industrial production 0.2 percent below its third quarter level and so confirms a negative contribution from the sector to real GDP growth. Business surveys for January have been mixed but the likelihood is that the first quarter will be another difficult one for goods producers. More generally, the December data reduce the region's ECDI to minus 4, its first sub-zero reading since mid-December, and the ECDI-P to minus 23. Economic activity in general is now falling behind market expectations.

Production in December, after rebounding 1.0 percent in November, is expected to reverse with a monthly decline of 0.9 percent. The year-over-year rate is seen falling to minus 0.6 percent from 2.0 percent growth.

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.