Industrial production made a very poor start to the year. A 1.1 percent monthly drop was much steeper than the market consensus and easily more than unwound a much shallower revised 0.4 percent gain in December. Strongly positive base effects still saw annual growth climb from 0.5 percent to 0.8 percent but production hit its lowest level since April 2023. Note that last month INSEE warned that problems with their seasonal adjustment programme due to unusual holiday timings might have artificially boosted the December data.

Manufacturing fared even worse with output falling fully 1.6 percent on the month to touch its worst level since last March. Transport equipment (minus 5.3 percent) and other manufacturing (minus 1.5 percent) did much of the damage and coke and refined petroleum products (minus 10.5 percent) posted a particularly large decrease. Elsewhere, food and drink (1.5 percent) and mining and quarrying, energy, water supply and waste management (1.6 percent) offered partial offsets and construction (0.3 percent) also edged higher.

January's surprisingly poor performance leaves overall goods production 0.7 percent below its average level in the fourth quarter when it dipped 0.1 percent versus the third quarter. Looking ahead, the February manufacturing PMI (47.1) was still below 50 but well up on January (43.1) and INSEE also found a modest improvement in sector sentiment. Even so, goods production looks unlikely to see much of a recovery near-term. In any event, with both the French RPI (20) and the RPI-P (15) above zero, at least overall economic activity is running somewhat hotter than expected.

Production is seen falling 0.2 percent versus December when it jumped a surprisingly steep 1.1 percent.

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.