Industrial production was surprisingly robust in August, increasing by 2.9 percent from the previous month, after a revised 2.9 percent decline in July. However, this growth is significant, production is still 2.5 percent lower than it was in August 2023. The automotive industry substantially contributed to this rebound, exhibiting a 19.3 percent increase in output following an 8.2 percent decline in July.

Capital goods production output was up 6.9 percent, while manufacturing, which excludes energy and construction, rose 3.4 percent. Consumer products remained constant but construction and energy also made modest contributions, with gains of 0.3 percent and 2.3 percent respectively.

Looking through the volatility, the 3-monthly change stands at minus 1.3 percent and so continues to show underlying weakness. That said, today's update at least lifts the RPI to 14 and the RPI-P to 25, both showing overall economic activity finally running slightly ahead of market forecasts.

Industrial production in August is expected to rise 0.8 percent on the month after a surprisingly large 2.3 percent decline in July.

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.