Industrial production had another good month in May. A surprisingly robust 1.2 percent increase versus April when it increased an unrevised 0.8 percent put output at its highest level since January 2021 and boosted annual growth from 1.7 percent to 2.6 percent. However, production was still 3.5 percent below its pre-pandemic level in February 2020.

Manufacturing expanded a slightly larger 1.4 percent on the month, its best performance in six months and its third gain in the last four. Output was higher in most industries, notably machinery and equipment (1.5 percent), transport equipment (1.0 percent) and other manufacturing (also 1.0 percent). The volatile coke and refined petroleum products category surged 45.1 percent after strike-related losses earlier in the year and food and drink rose 1.6 percent, its first advance since February. Elsewhere, construction climbed 0.9 percent and mining and quarrying, energy, water supply and waste management 0.2 percent.

May's solid gain flies in the face of the manufacturing sector PMI (45.7) and puts average industrial production so far this quarter 1.3 percent above its first quarter mean. Accordingly, goods producing industries are well placed to add to second quarter GDP growth. To this end, today's report lifts the French ECDI (8) and ECDI-P (10) back into positive surprise territory for the first time in a while implying that economic activity in general is now running a little ahead of market expectations.

May production is expected to slip 0.2 percent on the month in May after rising 0.8 percent in April.

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.