The story in August 2011 is not the headlines in Industrial Production – but the downward backward revisions which have created a four month flat growth trend line.
To begin, IP headline data has three parts – manufacturing, mining and utilities. In the August report, manufacturing was up 3.8%, mining up 5.6% and utilities were down 2.4%. Having utilities in the mix may or may not be confusing the data as weather creates nuances in the data.
The Fed explanation of the headline data:
Industrial production increased 0.2 percent in August after having advanced 0.9 percent in July. Manufacturing rose 0.5 percent in August, after a similarly sized gain in July, and the rates of change were revised down slightly in April, May, and June. In August, the output of mines moved up 1.2 percent. The output of utilities decreased 3.0 percent, as temperatures moderated somewhat from the previous month. At 94.0 percent of its 2007 average, total industrial production for August was 3.4 percent above its year-earlier level. Capacity utilization for total industry edged up to 77.4 percent, a rate 1.9 percentage points above its level from a year earlier but 3.0 percentage points below its long-run (1972–2010) average.
As Econintersect uses unadjusted data, it graphs the data YoY in monthly groups. It is difficult to tell by visual inspection whether industrial production improved this month.
The backward revisions this month poisoned last months interpretation of the data. Backward revisions which change trend lines make the real time data suspect. This month the year-over-year trend lines are as follows:
Compare this to last month’s graph.
Regardless of interpretation, there is nothing recessionary in this data. But how much faith can you have in data that is gyrating with backward revisions as seen here?