US industrial production is very weak

The U.S. industrial production numbers for September came out at 9:15ET this morning and they were very weak. However, it should be noted that the numbers were very distorted by lost production due to two hurricanes. Nevertheless, industrial production data — along with recently released jobless claims and retail sales numbers — represent further evidence of a recession in the United States.

I have crunched the numbers and provided some graphs below. The numbers to look at are the raw (non-seasonally adjusted) ones to compare them on a year-on-year basis. The trend in production in the U.S. that you see below is down. Irrespective of the one-month aberration due to the hurricanes, industrial production has been trending down since January 2008.


Now, I also tried to strip out month-to-month volatility by presenting average data for the last 12-months and compared it to the average one year back. And while this line is smoother, you can clearly see that production in the United States is trending down. In fact, if you were a business manager or an investor looking to make decisions about the future, this chart makes the trend much clearer. In predicting a slowing in the U.S. economy, the industrial production numbers show that you would have started to make your move by early 2006. The average change in industrial production peaked in Aug-Nov of 2005.

I think the obvious point here is that the data would have given someone pause as far back as early 2006. The downtrend that resulted in a housing collapse, a financial crisis and recession has been telegraphed for more than two years. The concept that this whole course of events comes as a surprise is false.

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The panic is over

Source
Industrial Production and Capacity Utilization – Federal Reserve Statistical Release