Industrial production had a surprisingly poor April, falling 0.3 percent versus March when it rose an unrevised 0.7 percent. Annual growth still edged up from minus 2.0 percent to minus 1.9 percent but only due to positive base effects and production was just 0.1 percent above its pre-Covid level in February 2020.

Manufacturing followed suit, also posting a 0.3 percent monthly drop after a 0.7 percent gain at quarter-end. Some eight of its 13 subsectors made negative contributions, notably pharmaceutical products where output fell fully 5.0 percent and computer, electronic and optical products (minus 3.8 percent).

Elsewhere, total industrial production was hit by a 1.9 percent fall in mining and quarrying and a 0.1 percent dip in water supply and sewerage but boosted by a 0.6 percent increase in electricity, gas, steam and air conditioning.

Today's update leaves total industrial production 0.2 percent above its average level in the first quarter and so potentially on course to make a positive contribution to current quarter GDP growth. However, business surveys remain gloomy and in May the manufacturing sector PMI stood at just 47.1. Still, at now 15 and 17 respectively, the UK's ECDI and ECDI-P remain above zero and indicate overall economic activity running slightly ahead of market expectations.

Industrial production is expected to dip 0.1 percent on the month in April following 0.7 percent gain in March. Manufacturing output, which also rose a monthly 0.7 percent in March, is similarly seen falling 0.1 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.