Industrial production contracted again in July and by a little more than expected. A 0.3 percent monthly drop was a tick steeper than the market consensus and although June's dip was revised away, output has still fallen in three of the last four months. Positive base effects boosted annual growth from minus 4.1 percent to minus 2.2 percent but goods production now stands at its lowest level since September 2020, in the midst of the pandemic.

The latest setback reflected fresh monthly falls in intermediates (1.3 percent), capital goods (1.6 percent) and consumer durables (2.8 percent). Only partial offsets were provided by gains in consumer non-durables (1.8 percent) and energy (0.3 percent).

Regionally the headline contraction was dominated by Germany (minus 3.0 percent) but there were losses too in France (0.5 percent), Italy (0.9 percent) and Spain (0.7 percent). Indeed, the overall decline would have been steeper but for improved performances by a number of the smaller member states.

The July data leave Eurozone industrial production 0.6 percent below its average level in the first quarter. The sector remains a major drag on the region's GDP growth and without a turnaround in Germany, looks likely to remain so for some time yet. Today's report puts the Eurozone RPI at minus 3 and the RPI-P at minus 12. Overall economic activity is essentially matching market expectations despite a slightly underperforming real economy.

Production in July is expected to fall a monthly 0.2 percent after an unexpected 0.1 percent decline in June that was well off expectations for a 0.7 percent rebound.

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.