Industrial production increases again in February, but ex-AI related utilities has made little progress since last July

 

 - by New Deal democrat

Probably my biggest theme right now is that most of the economy is either recessionary or at least on the cusp of recessionary. But this has been counterbalanced by AI data center- related spending, and the stock market boom and wealth effect it gave rise to. 

Last month I highlighted how that had shown up in the utilities portion of industrial production, which is extremely noisy month over month, but in the longer perspective was increasing much more than other production. There was more of both indications this month.

Industrial production as a whole rounded up from +0.151% to 0.2% in February (blue in the graph below), and to a lesser extent so did manufacturing production, also up 0.2% (red). I also show production less utility production (gold), to show how that is in accord with both other metrics:

Now let’s take a look at utilities production (orange) vs. industrial production less utilities (gold) since just before the pandemic:

It’s easy to see how sharply utilities production has pulled away from everything else, albeit with a huge amount of month to month noise. This month’s -06% decline barely registers on the trend.

Note that the significantly increasing trend from the middle of 2024 in industrial production is also apparent in the graph of durable goods orders (blue) and core capital goods orders (red) over the same time period:

The front-loading of orders before “Liberation Day” last year is also apparent.

Finally, I’ve noted a number of times how most coincident indicators have stalled since the middle of last year, and there may have been a “mini-recession” during the government shutdown last autumn. The below graph demonstrates how industrial production ex-utilities (gold) fits into that (all series normed to 100 as of last July):

Ex-AI related production, just like real sales (blue) and nonfarm payrolls (red), as well as real personal income less government transfers (not shown) has barely budged during the eight months since then.

And of course, all of this data is from the “before times” that do not include the war with Iran and the oil shock that has been developing since.

Weekly Indicators for March 9 - 13 at Seeking Alpha

 

 - by New Deal democrat

I neglected to post this over the weekend, so let’s get it out of the way now: my “Weekly Indicators” post is up at Seeking Alpha.

Unsurprisingly, the big news of the week was the continuing spike in oil prices, that spread to gas prices, that caused a selloff in the stock market. A little more surprisingly, the “flight to safety” trade towards the US$ is very intact.

As usual, clicking over and reading will bring you up to the moment as to the state of the economy, and reward me a little bit for bringing it to you.