Taiwan's industrial production index fell 20.5 percent on the year in January, weakening sharply from a decline of 7.93 percent in December. This is the biggest year-over-year decline in output since 2009, though the scale of the fall likely reflects the timing of lunar new year holidays. These were mainly observed in February in 2022 but in January in 2023, meaning that the holidays had little impact on economic activity in January 2022 but had a greater impact in January 2023. Combining January and February data, when the latter are published next month, will likely provide more meaningful information on the strength of economic conditions for the start of the year.

Today's data show output in the manufacturing sector also fell sharply in January, down 21.38 percent on the year, in line with PMI survey data that also showed a sharp contraction in the sector in January. Today's data also show year-over-year declines in output in the mining, water supply and electricity and gas sectors.

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.