Following two consecutive months of industrial production decline, the December 2024 industrial production numbers grew by 0.5 percent over the month. This was primarily driven by rebounds in manufacturing (0.7 percent) and mining and quarrying (1.5 percent), though declines in electricity and gas (minus 0.6 percent) and water supply and sewerage (minus 0.4 percent) dampened overall gains.

Manufacturing output saw seven of thirteen subsectors improve, with pharmaceuticals (5.1 percent), machinery and equipment (5.9 percent), and other manufacturing and repair (2.3 percent) leading the charge. However, the broader trend remains troubling. On an annual basis, production output fell by 1.9 percent, with manufacturing output declining further by 1.4 percent, indicating deep-rooted sectoral weaknesses.

Quarterly figures paint a stagnant picture, with the fourth quarter industrial production in 2024 falling by 0.8 percent-marking the fifth consecutive quarterly decline. Manufacturing (minus 0.7 percent), mining and quarrying (minus 2.5 percent), and electricity and gas (minus 0.7 percent) all dragged output down, while water supply and sewerage (1.2 percent) provided a slight counterbalance.

While December's modest gains offer a brief respite, the sector's ongoing struggles signal a broader industrial slowdown. Sustained recovery will depend on stronger manufacturing resilience and a rebound in energy-intensive industries. The latest update puts the UK RPI and RPI-P at 5. This means that economic activities are generally within the consensus of the UK economy.

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.