– by a New Deal Democrat
Slowing Industrial and Manufacturing Production: A Trend Analysis , I often call industrial production the King of Convergent Indicators because so often the turning point in this indicator has been at the highs and lows of the economy as a whole. This has not happened since last September, when this indicator last reached its peak.
And it continued its downward trend in June. Total production fell by -0.5% and industrial production fell by -0.3%:
On an annual basis, total production decreased by -0.4% and industrial production by -0.3%:
As you can see, until the recent past such declines were almost always recessionary. But since the “China shock” that began in 1999, there have been similar output declines that have not spread to the wider economy.
Finally, here’s a look at the motor vehicle manufacturing sub-sector:
This series is noisy, so while the big drop played a role in the declines in both total and manufacturing output in June, there’s simply no way to know if this was just one bad month or the start of a downward trend.
The conclusion is that this important indicator continues to be negative. Recession has been avoided – at least so far – thanks to the resolution of supply problems in vehicle manufacturing and housing construction and stable service costs. As we saw above, June was a weak month for car production. We’ll find out about housing later this week.