The headlines say seasonally adjusted Industrial Production (IP) improved in March. Econintersect\u2018s analysis using the unadjusted data concurs \u2013 but adds that this whole data series was revised on 28 March 2014 generally upward.
\nThe analysis below is based on changes to the new index values which were published weeks before this data release.
\n\u25feHeadline seasonally adjusted Industrial Production (IP) increased 0.7% month-over-month and up 3.8% year-over-year.
\n\u25feEconintersect\u2018s analysis using the unadjusted data is that IP growth accelerated 0.4% month-over-month, and is up 4.2% year-over-year.
\n\u25feThe year-over-year rate of growth has accelerated 0.3% from last month using a three month rolling average.
\n\u25feThe market was expecting 0.0% to 0.9% month-over-month (consensus 0.4%) versus the headline increase of 0.7%.
\n\u25feThe seasonally adjusted manufacturing sub-index (which is more representative of economic activity) was up 0.5% month-over-month \u2013 and up 2.8% year-over-year .<\/p>\n
IP headline index has three parts \u2013 manufacturing, mining and utilities \u2013 manufacturing was up 0.5% this month (up 2.8% year-over-year), mining up 1.5% (up 7.9% year-over-year), and utilities were up 1.0% (up 4.4% year-over-year). Note that utilities are 9.8% of the industrial production index.
\nUnadjusted Industrial Production year-over-year growth for the past 12 months has been between 2% and 4% \u2013 it is currently 4.1%. It is interesting that the unadjusted data is giving a smooth trend line.
\nEconomic downturns have been signaled by only watching the manufacturing portion of Industrial Production. Historically manufacturing year-over-year growth has been negative when a recession is imminent. This index is not indicating a recession is imminent.
\nEconintersect uses unadjusted data and graphs the data YoY in monthly groups. IP seems to have settled down to be somewhat predictable in the New Normal. It appears that industrial production has returned to pre-recession levels.
\nIndustrial production growth is NOT recessionary, and that the industrial portion of the USA economy is doing better than many other elements. Keeping it real, here is a comparison between the survey predictions and the hard data. Industrial Production is the long blue bars.
\nCaveats in the Use of Industrial Production Index<\/p>\n
Industrial Production is a non-monetary index \u2013 and therefore inflation or other monetary adjustments are not necessary. The monthly index values are normally revised many months after initial release and are subject to annual revision. The following graphic is an example of the variance between the original released value \u2013 and the current value of the index. Note that in general the current values are better than the original values \u2013 this is normally a sign of an improving economy.
\nThis index is somewhat distorted by including utility production which is noisy, based primarily on weather variations. There is some variance between the manufacturing component of industrial production which monitors production, and the US Census reported Manufacturing Sales. While it is true that these are slightly different pulse points (inventory not accounted in shipments) \u2013 they should not have different trends for long periods of time.
\nEconintersect determines the month-over-month change by subtracting the current month\u2019s year-over-year change from the previous month\u2019s year-over-year change. This is the best of the bad options available to determine month-over-month trends \u2013 as the preferred methodology would be to use multi-year data (but New Normal effects and the Great Recession distort historical data). <\/p>\n","protected":false},"excerpt":{"rendered":"
US industrial production grew a modest 0.7 percent in March after a February that was much stronger than originally reported. The Federal Reserve said Wednesday its output index for last month rose to 103.2, an increase of 3.8 percent from the year-…<\/p>\n","protected":false},"author":1,"featured_media":1864,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"footnotes":""},"categories":[128],"tags":[319],"class_list":["post-1863","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-industrial-manufacturing","tag-strategy","post-with-thumbnail","post-with-thumbnail-icon"],"yoast_head":"\n