Industrial production had a surprisingly good December. A 1.1 percent monthly rise in production was the best performance since last May and easily beat the market consensus. This was the fourth advance in the last six months and steep enough to leave output at its highest level since January 2021. That said, production was still some 3.7 percent below its pre-pandemic level in February 2020 and INSEE warned that problems with their seasonal adjustment programme due to unusual holiday timings might have artificially boosted the December data.

Manufacturing output fared even better, posting a 1.2 monthly gain following a downwardly revised 0.2 percent increase previously. Within this, transport equipment (1.6 percent), food (1.5 percent) and the other manufacturing category (2.1 percent) all saw healthy rises but machinery and equipment (minus 2.4) and coke and refined petroleum products (minus 1.7 percent) fell sharply. Elsewhere, mining and quarrying, energy, water supply and waste management edged 0.2 percent firmer while construction was up fully 3.0 percent, its first increase since September.

Despite December's jump, fourth quarter industrial production was still 0.2 percent below its level in the third quarter so the sector was a drag on GDP growth. Looking ahead, recent sector PMIs have been particularly weak (January just 43.1) suggesting no meaningful recovery this quarter but these underestimated production in much of 2023 and INSEE's own manufacturing surveys have been much less pessimistic. In any event, with both the French RPI (18) and the RPI-P (4) above zero, overall economic activity is at least running a little hotter than expected.

December production is expected to rise 0.2 percent on the month after rising 0.5 in November which was the first monthly increase since July.

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.