Overall industrial production was weaker than expected in February. A 0.2 percent monthly decline was well short of the market consensus and followed a steeper revised 0.5 percent drop in January. However, annual growth was little changed at minus 3.1 percent, up just a tick from its rate at the start of the year.

Manufacturing fared little better, posting no change versus January, albeit following that month's shallower revised 0.1 percent dip. Within this, seven of its 13 subsectors contributed negatively, most notably chemicals and chemical products where output dropped 2.5 percent. However, the impact here was offset by a 2.9 percent spike in computer, electronic and optical products.

Elsewhere total industrial production was hit by falls in electricity and gas (2.2 percent) and water supply and sewerage (1.3 percent), although declines here were partially offset by a 3.0 percent increase in mining and quarrying.

Industrial production in February was still 0.7 percent short of its pre-pandemic level, while manufacturing was down 0.1 percent. Moreover, with average production in January/February 0.5 percent below its fourth quarter mean, the sector is on course to subtract from first quarter GDP growth. The UK's ECDI now stands at minus 4 and the ECDI-P at minus 13, both values indicating that overall economic activity is also falling marginally short of market expectations.

Industrial production is expected to rise 0.2 percent in February following a 0.3 percent fall in January. Manufacturing output in February is expected to rise 0.3 percent.

Industrial production measures the physical output of the mining and quarrying, manufacturing, gas and electric, and water supply and sewerage sectors. Manufacturing is seen as the best guide to underlying developments as the other subsectors can be highly volatile on a short-term basis. Estimates are largely based on a monthly business survey of roughly 6,000 companies.

Industrial and manufacturing outputs are watched carefully by market participants despite the decline in the importance of manufacturing in the UK economy. Manufacturing output is the preferred number rather than industrial production which can be unduly influenced by electrical generation and weather. The manufacturing index is widely used as a short-term economic indicator in its own right by both the Bank of England and the UK government. Market analysts also focus on manufacturing and its sub-sectors to get insight on industry performance.

Industrial production accounts for less than 16 percent of the economy within which the key manufacturing sector is worth about ten percentage points. Total manufacturing is divided into thirteen sub-sectors, ranging from food, drink and tobacco through chemicals and chemical products to electronics and transport equipment. Consequently, 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.

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.