The goods producing sector had a poor July, posting a surprisingly steep 0.8 percent monthly fall that fully unwound June's unrevised advance. The decline was the first since April but, with base effects positive, still small enough to boost yearly growth from minus 1.4 percent to minus 1.2 percent.

Manufacturing fared rather worse with a 1.0 percent monthly drop after a 1.1 percent increase previously. Some seven of its 13 subsectors recorded losses with the largest negative contributions coming from transport equipment and machinery and equipment which recorded falls of 2.3 percent and 4.7 percent respectively. Wood and paper products (1.6 percent) chalked up easily the largest increase.

Meantime, total industrial production was also boosted by a rise in mining and quarrying (3.9 percent) but negatively impacted by weakness in water supply and sewerage (minus 0.7 percent) and electricity and gas (minus 1.7 percent).

The July report puts the 3-monthly change in overall goods production at minus 0.1 percent and in manufacturing output at minus 0.3 percent. However, the August manufacturing PMI (52.5) was positive so the outlook for the rest of the quarter should be a little brighter. Today's releases put the UK RPI at minus 9 and the RPI-P at minus 15 meaning that in general, economic activity is falling slightly short of market forecasts.

Industrial production is expected to rise 0.2 percent in July after a surprisingly robust 0.8 percent gain in June. Manufacturing output, which in June jumped 1.1 percent, is also expected to rise 0.2 percent.

Industrial production measures the physical output of the mining and quarrying, manufacturing, gas and electric, and water supply and sewerage sectors. Manufacturing is seen as the best guide to underlying developments as the other subsectors can be highly volatile on a short-term basis. Estimates are largely based on a monthly business survey of roughly 6,000 companies.

Industrial and manufacturing outputs are watched carefully by market participants despite the decline in the importance of manufacturing in the UK economy. Manufacturing output is the preferred number rather than industrial production which can be unduly influenced by electrical generation and weather. The manufacturing index is widely used as a short-term economic indicator in its own right by both the Bank of England and the UK government. Market analysts also focus on manufacturing and its sub-sectors to get insight on industry performance.

Industrial production accounts for less than 16 percent of the economy within which the key manufacturing sector is worth about ten percentage points. Total manufacturing is divided into thirteen sub-sectors, ranging from food, drink and tobacco through chemicals and chemical products to electronics and transport equipment. Consequently, 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.

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.