Goods production lost ground in May. A 0.2 percent monthly decline was just marginally steeper than the market consensus but, following April's unrevised 0.3 percent gain, halved annual growth to 0.9 percent. The fall left output some 4.6 percent below its pre-pandemic level in February 2020.

Manufacturing fared rather better, posting a 0.2 percent monthly rise largely on the back of a rebound in motor vehicles and parts (4.9 percent). By contrast, pharmaceutical products and preparations (minus 13.1 percent) decreased sharply. Capital goods advanced 1.3 percent but both intermediates (minus 0.5 percent) and consumer goods (minus 1.2 percent) suffered fresh declines. Elsewhere, construction dropped 0.4 percent and energy 7.0 percent.

May's modest setback puts average industrial production in the first two months of the quarter 0.6 percent below its first quarter mean. Absent revisions, this leaves June needing an improbable monthly rise of at least 2.0 percent just to hold the quarter flat. Today's update puts both the German ECDI and ECDI-P at minus 14, showing that economic activity in general is running a little cooler than market expectations.

After April's 0.3 percent monthly rise, industrial production in May is expected to slip 0.1 percent. The year-over-year comparison is seen holding steady at plus 1.8 percent.

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.