Industrial production began 2023 on a surprisingly downbeat note. Following an upwardly revised 1.5 percent monthly rise in December, output fell fully 1.9 percent, its worst performance since October and well below the market consensus. The drop cut annual growth from 1.8 percent to minus 2.2 percent and widened the shortfall versus its pre-pandemic level in February 2020 to some 5.8 percent.

Manufacturing fared little better, declining 1.8 percent versus December when it edged up just 0.2 percent. Coke and refined petroleum products (3.6 percent) again saw the largest increase although machinery and equipment (1.0 percent) also had a good month. However, transport equipment (minus 6.7 percent) and other manufacturing (minus 2.0 percent) fell sharply as did mining and quarrying, energy, water supply and waste management (minus 3.0 percent). Construction (0.2 percent) only recovered a small part of December's loss.

January's setback leaves overall industrial production 0.3 percent below its average level in the fourth quarter when it declined 0.5 percent. Consequently, with the February manufacturing PMI (47.4) well below 50, the sector could find itself in recession by March. That said, the French ECDI (11) and ECDI-P (13) are still in positive surprise territory indicating that economic activity in general continues to beat market expectations, albeit not by much.

Production is seen up 0.2 percent after a 1.1 percent bounce in December.

Industrial production measures the physical output of the nation's factories, mines and utilities. Manufacturing is seen as the best guide to underlying developments as some sectors can be very volatile and cause misleadingly large short-term swings in total industrial production.

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. Like the PPI and the orders data, construction is excluded from the data. 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.