Industrial production was much weaker than expected at the start of the year. Following a notably smaller revised 1.6 percent monthly rise in December, output fell fully 3.2 percent, its worst performance since March 2023. Annual growth slumped from 0.2 percent to minus 6.7 percent and production now stands at its weakest level since September 2020.

January's monthly drop was largely due to capital goods which more than reversed December's 11.3 percent surge with a drop of some 14.5 percent. Consumer durables (minus 1.2 percent) and non-durables (minus 0.3 percent) also lost ground but intermediates (2.6 percent) increased for the first time since last May and energy (0.5 percent) was also stronger.

Regionally, Ireland (minus 29.0 percent after 19.0 percent) again added significantly to overall monthly volatility. However, with the notable exception of Germany (0.6 percent), around half of the member states posted fresh declines.

In line with the December report, sharp swings in Ireland mean that today's update provides a distorted impression of Eurozone manufacturing at the start of 2024. Nonetheless, the region's goods producing sector is clearly still struggling and will almost certainly subtract from first quarter GDP. That said, with the region's RPI at 5 and the RPI-P at exactly zero, at least overall economic activity is broadly performing as the forecasters predicted.

Production in January is expected to fall a monthly 1.1 percent after jumping a surprising 2.6 percent in December. Consensus for January's year-over-year rate is 2.7 percent contraction versus December expansion of 1.2 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.