FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 15 July 2016

June 2016 Industrial Production Remains In Contraction Year-over-Year But Trend Lines Improved.

Written by Steven Hansen

The headlines say seasonally adjusted Industrial Production (IP) improved. The year-over-year data remains in contraction but the trend lines are now pointing towards improvement.

  • Headline seasonally adjusted Industrial Production (IP) increased 0.6 % month-over-month and down 0.7 % year-over-year.
  • Econintersect's analysis using the unadjusted data is that IP growth accelerated 1.0 % month-over-month, and is down 0.4 % year-over-year.
  • The unadjusted year-over-year rate of growth accelerated 0.7 % from last month using a three month rolling average, and is down 1.0 % year-over-year.
  • The market was expecting (from Bloomberg):
Headline Seasonally Adjusted Consensus Range Consensus Actual
IP (month over month change) 0.1 % to 0.5 % +0.4 % +0.6 %
Capacity Utilization 74.9 % to 75.2 % 75.0 % 75.4 %
IP Subindex Manufacturing (month over month change) 0.1 % to 0.5 % +0.3 % +0.4 %

IP headline index has three parts - manufacturing, mining and utilities - manufacturing was up 0.4 % this month (up 0.4 % year-over-year), mining up 0.2 % (down 10.5 % year-over-year), and utilities were up 2.4 % (up 0.5 % year-over-year). Note that utilities are 10.8 % of the industrial production index, whilst mining also is 10.8 %.

Comparing Seasonally Adjusted Year-over-Year Change of the Industrial Production Index (blue line) with Components Manufacturing (red line), Utilities (green line), and Mining (orange line)

Unadjusted Industrial Production year-over-year growth for the past 2 years has been near or below zero - it is currently in contraction but trending up.

Year-over-Year Change Total Industrial Production - Unadjusted (blue line) and the Unadjusted 3 month rolling average (red line)

z ip3.PNG

Economic 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 nearing the warning area for a recession.

Seasonally Adjusted Manufacturing Index of Industrial Production - Year-over-Year Growth

Seasonally Adjusted Capacity Utilization - Year-over-Year Change - Seasonally Adjusted - Total Industry (blue line) and Manufacturing Only (red line)

Econintersect uses unadjusted data and graphs the data YoY in monthly groups.

Total Industrial Production - Unadjusted

z ip1.PNG

The industrial portion of the USA economy is in a recession.

Summary of all Federal Reserve Districts Manufacturing:

Richmond Fed (hyperlink to reports):

z richmond_man.PNG

Kansas Fed (hyperlink to reports):

z kansas_man.PNG

Dallas Fed (hyperlink to reports):

z dallas_man.PNG

Philly Fed (hyperlink to reports):

z philly fed1.PNG

New York Fed (hyperlink to reports):

z empire1.PNG

Federal Reserve Industrial Production - Actual Data (hyperlink to report):

Holding this and other survey's Econintersect follows accountable for their predictions, the following graph compares the hard data from Industrial Products manufacturing subindex (dark blue bar) and US Census manufacturing shipments (lighter blue bar) to the Dallas Fed survey (light blue bar).

Comparing Surveys to Hard Data:

z survey1.png

In the above graphic, hard data is the long bars, and surveys are the short bars. The arrows on the left side are the key to growth or contraction.

Caveats in the Use of Industrial Production Index

Industrial Production is a non-monetary index - 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 - and the current value of the index. If the current values are better than the original values - this is normally a sign of an improving economy.

Total Industrial Production - Unadjusted - Original Headline Index Value (blue line) and Current Index Value (red line)

/images/z ip2.PNG

This 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) - they should not have different trends for long periods of time.

Comparing Year-over-Year Change - Manufacturing Industrial Production (blue line) to Inflation Adjusted Manufacturers Shipments (green line)

Econintersect determines the month-over-month change by subtracting the current month's year-over-year change from the previous month's year-over-year change. This is the best of the bad options available to determine month-over-month trends - as the preferred methodology would be to use multi-year data (but New Normal effects and the Great Recession distort historical data).

>>>>> Scroll down to view and make comments <<<<<<

Permanent link to most recent post on this topic

Click here for Historical Releases Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted.  As the internet is a "war zone" of trolls, hackers and spammers - Econintersect must balance its defences against ease of commenting.  We have joined with Livefyre to manage our comment streams.

To comment, using Livefyre just click the "Sign In" button at the top-left corner of the comment box below. You can create a commenting account using your favorite social network such as Twitter, Facebook, Google+, LinkedIn or Open ID - or open a Livefyre account using your email address.

You can also comment using Facebook directly using he comment block below.

Econintersect Economic Releases


Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Take a look at what is going on inside of
Main Home
Analysis Blog
A Short Note on a Connection Between Marginalist Economics and Folk Medicine
Run A High Pressure Economy? Janet Yellen Does Not Understand the Problem
News Blog
Rail Week Ending 22 October 2016 Better Than The Previous Week
What Happens After The Islamic State Loses Mosul
Infographic Of The Day: The History Of Women's Ice Hockey In Canada
Early Headlines: Asia Stocks Mixed, Huge Antarctic Marine Park, Can Trump Get To 270?, US Workers Gaining, UK Inflation, France GDP, India Savings Lag And More
Why Amazon Gives So Many Perks To Prime Members
Where Workplace Trust Is Strongest
How A Lack Of Sleep Affects Your Brain - And Personality
How Accurate Are Final US Election Polls
What We Read Today 27 October 2016
A Pony And His Beloved Teddy Bear Reunite After Being Apart For 3 Years
October 2016 Kansas City Fed Manufacturing Remains In Expansion
September 2016 Median Household Income Not Statistically Different Than The Previous Month
September 2016 Pending Home Sales Index Improves
Investing Blog
Technical Thoughts: Looking For The Rebounds
Gold That Pays Dividends
Opinion Blog
Global Debt Investors: The Silence Of The Lambs
A Hard Brexit And Reduced Migration Won't Benefit UK Workers
Precious Metals Blog
Inflation Surging As Platinum Signals Stock Market Decline
Live Markets
27Oct2016 Market Close: Wall Street Closes Fractionally Lower, Interest-Rate Stocks Outweighed Gains In Healthcare, Market Indicators Bearish
Amazon Books & More

.... and keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

Crowdfunding ....



Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2016 Econintersect LLC - all rights reserved