Tuesday, May 16, 2023

April industrial production looks great! - until you account for the March revisions


 - by New Deal democrat

The second of this morning’s three significant economic releases was April industrial production, and here the revisions were very important.

In April total production increased 0.5% from March, but March itself was revised downward by -0.5%, so the net result was unchanged. Manufacturing production increased 0.9% from March, but March was revised downward by -0.6%, for a net increase of 0.3%:

Both measures remain below their respective September and October 2022 peaks, by -0.5% and -0.9% respectively.

On a YoY basis, total production (including mining and utilities) is only up 0.2%, while manufacturing production is down -0.8%. Here’s what that looks like in comparison with the last 50 years:

Typically this kind of YoY decline in manufacturing has been associated with a recession, or at very least a slowdown. Because so much manufacturing was offshored beginning in 2000, note that we had steep downturns twice in the last decade before the pandemic without the economy going into recession. 

This is because consumer income and spending held up well. But as we saw from this morning’s retail sales report, that has not been the case over the past year.

Because manufacturing production goes into sales or inventories, it also gives us a clue about real manufacturing and trade sales one month before the official number comes out. I’ll update this once the March nominal number is reported later today.