Industrial production was stronger than expected at the start of the year but after a steeper revised decline at the end of 2023. Output increased 1.0 percent on the month in January, some 0.4 percentage points above the market consensus but only denting December's slide which now stands at a hefty 2.0 percent. Negative base effects saw annual growth slump from minus 3.5 percent to minus 5.4 percent and output was still some 10.2 percent below its pre-Covid level.

Manufacturing fared a little better, posting a 1.1 percent monthly advance as intermediates jumped fully 4.4 percent and consumer goods 4.0 percent. However, a partial offset was provided by capital goods which fell 2.1 percent. Elsewhere, energy also dropped 3.7 percent but construction expanded 2.7 percent.

January's limited recovery leaves intact a declining trend in industrial production that looks very likely to subtract again from GDP growth this quarter. As it is, output is 0.4 percent below its fourth quarter average. Even so, today's report boosts the German RPI to 1 and the RPI-P to 12 meaning that, outside of inflation, overall economic activity is running a little ahead of market expectations.

Industrial production in January is expected to rebound 0.6 percent on the month after falling a much deeper-than-expected 1.6 percent in December, which was the sixth decline of the last seven reports and the third straight below estimates. The year-over-year comparison is seen decreasing 4.9 percent following 3.1 percent contraction in December.

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.