Industrial production was a good deal stronger than expected in August with a 0.6 percent monthly rise that was well above the market consensus. However, this followed a steeper revised 1.3 percent drop in July and, with base effects very negative, slashed annual growth from minus 2.2 percent to minus 5.1 percent.

The latest overall monthly rise was driven by a 1.2 percent jump in consumer durables, supported by smaller gains in consumer non-durables (0.5 percent) and capital goods (0.3 percent). By contrast, intermediates fell 0.3 percent and energy was off 0.9 percent.

Regionally, France (minus 0.2 percent) and Spain (minus 0.7 percent) posted monthly falls but both Germany (0.1 percent) and Italy (0.2 percent) eked out small advances.

Despite August's bounce, average Eurozone industrial production in the first two months of the quarter was still 1.0 percent below its second quarter mean. Without revisions, this means September will need a monthly increase of at least 2.7 percent just to keep the third quarter flat. Accordingly, it looks very likely that the sector will subtract from GDP growth which could easily be negative. Today's data put the Eurozone RPI at minus 16 and the RPI-P at minus 7, both readings pointing to a limited degree of overall economic underperformance.

Production in August is expected to come in unchanged after falling 1.1 percent in July. Consensus for August's year-over-year rate is contraction of 3.5 percent versus July's contraction of 2.2 percent.

Industrial production measures the physical output of factories, mines and utilities. The measure provided by Eurostat excludes the volatile construction subsector for which data are released a few days later.

Industrial production measures changes in the volume of output for the EMU's member states. The industrial production index provides a measure of the volume trend in value added at factor cost over a given reference period, excluding VAT and other similar deductible taxes. The preferred number is industrial production excluding construction. As with other EMU statistics, the data are provided by the national statistics offices to Eurostat (the European Union statistical agency) where it is combined to produce an overall output measure.

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.