Industrial production was again stronger than expected in February. Following an upwardly revised 1.3 percent monthly increase in January, output increased a further 2.1 percent, easily beating the market consensus. This was its first back-to-back gain since January/February 2023. Even so, while the advance boosted production to a 7-month high, it left yearly growth still well below zero at minus 4.8 percent.

Manufacturing also had a good month, expanding 1.9 percent versus January, mainly due to strength in autos (5.7 percent) and chemicals (4.6 percent). Intermediates were up 2.5 percent and capital goods 1.5 percent and consumer goods 1.9 percent. Elsewhere, energy dropped 6.5 percent but construction expanded fully 7.9 percent.

The February bounce puts average industrial production in the first two months of the quarter 1.0 percent above its fourth quarter mean. Absent any revisions, March would need a monthly fall of at least 4.1 percent to prevent the sector from adding to quarterly GDP growth. Nonetheless, while last quarter is shaping up surprisingly well, the ongoing trend decline in orders still makes for a soft near-term outlook. Today's reports put the German RPI at minus 4 and the RPI-P at 8. Overall economic activity is running broadly in line with market expectations.

Industrial production in February is expected to rebound a further 0.3 percent on the month after rising a better-than-expected 1.0 percent in January. Yet the year-over-year comparison is seen sinking to minus 7.1 percent following January's 5.4 percent contraction.

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.