Goods production fell again in September. A 1.4 percent monthly drop was much steeper than the market consensus, albeit after a marginally shallower revised 0.1 percent dip in August. This was the fourth consecutive decline and reduced annual growth to minus 3.9 percent, down from minus 1.5 percent. It also left output at its weakest level since August 2020, in the midst of Covid.

Manufacturing fared even worse, posting a 1.7 percent monthly drop as capital goods fell 0.2 percent, intermediates 1.9 percent and consumer goods fully 4.9 percent. Elsewhere, energy production was off 1.7 percent while construction was flat.

The latest, broad-based, setback leaves third quarter industrial production 2.0 percent below its level in the previous period and so confirms a sizeable hit to GDP growth. Moreover, with manufacturing orders still trending south, the fourth quarter looks unlikely to be much better. In the absence of a strong performance by services, recession will have arrived by year-end. The disappointing September results put the German RPI and RPI-P at minus 7, showing overall economic activity falling modestly short of market expectations.

Yet another decline is expected for industrial production, at a consensus 0.4 percent in September. The year-over-year comparison is seen falling 3.2 percent following 1.7 percent contraction in August.

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.