- by New Deal democrat
Late last year I noticed that the regional Fed manufacturing indicators were improving - despite the “Liberation Day” tariffs and the general chaos coming out of Washington. It appeared that manufacturers had found a modus vivendi and had adapted to the new environment. That subsequently showed up in a number of manufacturing related statistics, like durable and capital goods orders, and even in manufacturing employment.
It also showed up - as did the Boom in AI data center construction - in industrial production, which was updated this morning for May. I used to call Industrial Production “the King of Coincident Indicators,” but with the shrinking of manufacturing as a share of the US economy to about 25%, 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.*
In April manufacturing (red in the graph below) broke out of that range to the upside, increasing 0.6% for the month, while the more noisy utility production (gold, right scale) increased 1.9%, driving total production (blue) to a 0.7% increase and a new post-pandemic high. May total prodcution and manufacturing continued to be positive, although much more subdued. Total production increased 0.1%, manufacturing production less than 0.1% rounded to 0. Meanwhile utilities declined -0.4% [Note: all values are normed to 100 as of September 2018, the peak month for production in the last expansion]:
On a YoY basis, manufacturing production was up 1.7%, manufacturing up 1.4%, and utilities up 3.1%:
There is no sign yet of any break in the recent trend in any of these indicators. Simply put, the goods producing sector of the economy remained in expansion in May.