Wednesday, March 23, 2016

Is Industrial Production "less bad"?

 - by New Deal democrat

One of my pet peeves is analysis that relies too much on Year-over-year comparisons, as in "X is still YoY positive/negative."  If you do that, you are going to miss turning points, which happened sometime during that year - perhaps many months before the sign turned.

But one good use of YoY comparisons is to see if they are getting "less good/bad."  This will help you spot a change in trend.

A few analyses in the last several weeks noted an improvement in the YoY comparison in Industrial Production, and I also made mention of it in my last Weekly Indicators  column.  But let's take a little closer look, first at the long term:

YoY industrial production tends to bottom right at the end of recessions (this is true of most recessions over the last 100 years, the above graph is limited better to show the current situation).  That little hook at the right is the recent improvement in YoY industrial production.

Here is a close-up of the lastl year:

There have only been two months of "less worse" readings, and they are well within the range of noise.  I would like to see several more months of such improvement before I would be confident that the shallow industrial recession has bottomed -- although, with the recent decline in the US$, that is the more likely scenario.