- by New Deal democrat
Since I didn’t get to it yesterday, let me say a few words about yesterday’s industrial production report for March this morning.
I used to call this “the King of Coincident Indicators,” but with the shrinking of manufacturing as a share of the US economy, that is no longer the case. Nevertheless, it is an important coincident indicator, with the emphasis on *coincident.* It doesn’t tell us where we are going, but is an important signpost about where we *are.*
And what yesterday’s release showed us, for the about the sixth month in a row, is that the coincident economy is stagnant (but not contracting!), with the big exception of AI-related spending.
In March total industrial production (blue in the graph below) declined -0.5%, although February was revised higher to +0.7%. Manufacturing production (red, right scale) declined -0.2% and was revised lower for the previous several months. Total production is only 0.2% higher than what it was last August, and manufacturing production is lower than it was during the entire July-September period:
Where AI-related spending shows up is in the utilities subindex (gold in the graph below, right scale). If we look at all industrial production less utilities (blue, left scale), then like manufacturing, production has made no headway since last summer, and indeed is slightly lower:
So as I started out above by saying, the message of industrial production was not one of contraction, but one of being stagnant with the exception of AI-related data center construction and support.
