Industrial production was much stronger than expected in January. A 3.5 percent monthly rise was fully 2 percentage points above the market consensus and more than reversed December's shallower revised 2.4 percent drop. Annual growth was still negative at minus 1.2 percent but up from minus 3.6 percent last time. Even so, production was still some 4.8 percent below its pre-pandemic level in February 2020.

Manufacturing fared slightly worse but still saw a 1.9 percent monthly gain. This was on the back of a 6.9 percent jump in intermediates which more than offset declines in capital goods (0.6 percent) and consumer goods (1.8 percent). Electronic equipment (7.1 percent) and chemicals and chemical products (9.8 percent) were especially robust. Elsewhere, energy was up 0.4 percent and construction jumped 12.6 percent after a weather-impacted 7.5 percent slump in December.

January's rebound puts total industrial production 1.9 percent above its average level in the fourth quarter. Moreover, with orders posting back-to-back gains in December and January, the near-term outlook would seem a good deal less gloomy than for some time. That said, domestic demand is still soft and compared with a year ago, orders growth (minus 11.0 percent) is much more negative than production. More generally, today's update puts the German ECDI at 8 and the ECDI-P at 4, both measures indicating that overall economic activity is broadly matching market expectations.

Industrial production in January is expected to rise 1.5 percent on the month following a 3.1 percent monthly drop in December that was much weaker than expected.

Industrial production measures the physical output of the nation's factories, mines and utilities. Data are collected from companies in the sector with fifty or more employees and include mining and quarrying, manufacturing, energy and, in contrast to its Eurozone counterpart, construction.

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.

Like the manufacturing orders data, the production index has the advantage of being available in a timely manner giving a more current view of business activity. Those responding to the data collection survey account for about 80 percent of total industrial production. Like the PPI and the orders data, construction is excluded.

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.