Industrial production was much weaker than expected at the start of the quarter. July's 0.7 percent monthly fall was more than double the market consensus and easily reversed June's unrevised 0.5 percent advance. The drop left output at a 3-month low and trimmed annual workday adjusted growth from minus 0.7 percent to minus 2.1 percent.

The monthly slide was broad-based and would have been steeper but for a 3.7 percent bounce in energy. Consumer goods declined 1.6 percent, capital goods 1.5 percent and intermediates 0.5 percent. However, over the latest three months, production was still up a modest 0.2 percent.

The July report leaves a broadly flat trend to overall industrial production and, despite persistently weak PMI surveys, may pave the way for the third quarter to avoid a contraction for the first time since the second quarter of 2022. However, even should this be the case, demand is soft and it is difficult to see the sector making much of a contribution to GDP growth. Today's data put the Italian RPI at 7 and the RPI-P at minus 1. In other words, overall economic activity is performing much as expected.

Production is expected to slip 0.3 percent on the month after a 0.5 percent rise in June.

Industrial production measures the physical output of the nation's factories, mines and utilities. Construction is excluded. Approximately 4,100 companies provide data on more than 8,000 monthly flows of 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 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 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.