In line with January, industrial production was again much stronger than expected in February. A 2.0 percent monthly rise was nowhere near the market consensus and followed an even stronger revised 3.7 percent jump at the start of the year. At 0.7 percent, annual growth moved back above zero and up from minus 1.0 percent last time but output was still some 2.7 percent below its pre-pandemic level in February 2020.

Manufacturing fared even better, posting a 2.4 percent monthly increase with motor vehicles and parts up fully 7.6 percent. Capital goods advanced 3.4 percent, intermediates 1.8 percent and consumer goods 1.4 percent. Elsewhere, construction also made fresh ground but energy declined 1.1 percent.

February's increase leaves average industrial production in the first two months of the quarter some 3.1 percent above its average level in the fourth quarter. This leaves the sector very well placed to make a positive contribution to GDP growth absent revisions, March would need a fall of more than 10 percent for a negative impact. With orders also strengthening sharply, the near-term outlook is now a good deal better than seemed likely just a few months. To this end, today's update puts both the German ECDI and ECDI-P at 14, both measures indicating that overall economic activity is also running somewhat hotter than market expectations.

Industrial production in February is expected to hold unchanged on the month following a 3.5 percent monthly jump in January. The year-over-year comparison is seen falling 4 tenths to 1.6 percent contraction.

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.