– by a New Deal Democrat
Industrial production fell -0.2% in November and industrial production fell -0.6%, essentially returning both measures to their July levels:
I call industrial production the King of Coincident Indicators because its peak most often coincides with the month of the beginning of the recession as determined by the NBER. So the fact that total production is almost flat over 4 months and down -0.3% from 2 months ago is an important sign of caution; especially since real retail sales, the main component of total manufacturing and trade sales also relied on by the NBER, also declined significantly in November.
On an annual basis, general production remained higher by 2.5% and industrial production by 1.4%. The chart below shows the last 50 years of this metric, with both values normalized to 0:
When the US was the world’s manufacturing powerhouse, these annualized numbers were recessionary. But over the past 30 years, as the U.S. economy has become increasingly service-dominated, year-over-year readings like these have also equated to a slowdown during an expansion.
In any case, if the king of matching indicators has indeed peaked, then next week’s personal income report, which minus transfer payments is another important indicator used by the NBER, takes on added significance.