Industrial production failed to rebound as expected in July. A flat performance versus June, when output declined an unrevised 1.1 percent, was well short of the market consensus although annual production growth still jumped a misleadingly large 1.5 percentage points to 4.0 percent courtesy of favourable base effects.
Weakness was most apparent in energy which posted a hefty 4.7 percent monthly fall and this was large enough to mask a modest 0.3 percent increase in the key manufacturing sector. Even so, capital goods compounded June's 1.5 percent decrease with a further 0.3 percent drop and consumer goods, down 0.7 percent last time, matched this decline. However, intermediates (1.4 percent) had a very solid month and construction (0.5 percent) also provided a boost.
Overall industrial production in July was 0.3 percent below its second quarter average while manufacturing was just 0.1 percent firmer. The sluggishness of the last two months contrasts with the very bullish picture painted by business surveys, notably the sector PMI. August looks likely to have been a much better period but it not, real GDP growth could disappoint this quarter as service sector activity has been lagging for a while.