Industrial production rose more sharply than expected in December. A 1.1 percent monthly increase beat the market consensus by 0.4 percentage points and was the best performance since May last year. It was also the first gain since August. Following a slightly shallower revised 1.3 percent drop in November, the year-end bounce lifted annual workday adjusted growth from minus 2.9 percent to minus 2.1 percent.

December's monthly rise was broad-based with only energy (minus 2.0 percent) recording a decline. Consumer goods (3.0 percent) were especially robust, but there were solid increases too in both capital goods (1.6 percent) and intermediates (0.8 percent).

Even so, overall production last quarter was still down 0.5 percent versus the previous period, its fifth decrease in the last six quarters. Indeed, output at year-end matched its second lowest level since December 2020. Moreover, with the sector PMI (48.5) still sub-50 in January, the chances are that the current quarter will not see much, if any improvement. The Italian RPI now stands at minus 14 but with the RPI-P at exactly zero, it has been only inflation that has recently been undershooting market expectations.

With a 3.4 percent surge needed just to keep fourth quarter output flat, production in December is expected to rise 0.7 percent on the month following a sharper-than-expected fall of 1.5 percent in November.

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.