Thursday, May 16, 2024

Industrial production still flat, manufacturing slides


 - by New Deal democrat

Industrial production, one of the premier series the NBER has historically used to declare recessions vs. expansions, has faded in importance since China was admitted to regular trading status in 1999. As you can see in the first graph below, both total and manufacturing production peaked in 2007. Further, manufacturing has continued to fade, as its post-pandemic peak has not equaled its 2010’s peak either:

In March, total production was unchanged from net upward revisions to February and March. Without those revisions, production would have been up 0.1%. Nevertheless it is still down -0.7% from its September 2022 post-pandemic peak. 

The news was significantly negative for manufacturing production, which declined -0.3% from net downward revisions of -0.2% for February and March, and is down by -1.8% from its post-pandemic peak as well:

Note that in 2023, like 2015-16, and 2019,  production was again down YoY with no recession. As of April, manufacturing production is down -0.1% YoY, while total production is down -0.4%.

Through March, production had essentially been flat. With all the revisions, as of April the trend may still be neutral, or it may have turned slightly negative. This is what we have been seeing for a year or more in both the ISM manufacturing index and in the Fed regional indexes. 

My overall theme for this year has been to watch both manufacturing and construction for any signs of strength or weakness. If we have - at least as of April - a confirmed sign of weakness in manufacturing, then construction becomes even more important. In my post later today, I’ll update that sector.