Industrial Production Flat in October 2010

Industrial Production (IP) and Capacity Utilization remained unchanged month-over-month in October 2010.  The headlines from the Fedreal Reserve release:

Industrial production was unchanged in October after having fallen 0.2 percent in September. For the manufacturing sector, output gained 0.5 percent in October after having risen 0.1 percent in September. Factory production in September was initially reported to have decreased 0.2 percent, but incoming data on steel, fabricated metal products, machinery, and chemicals helped boost the index. The output of utilities dropped 3.4 percent in October, as unseasonably warm temperatures reduced demand for heating. Production at mines fell 0.1 percent. At 93.4 percent of its 2007 average, total industrial production in October was 5.3 percent above its year-earlier level.

The capacity utilization rate for total industry was flat at 74.8 percent, a rate 6.6 percentage points above the low in June 2009 and 5.8 percentage points below its average from 1972 to 2009.

Econintersect evaluates data without seasonal adjustments.  There is no quantitative methodology which can deal with a data perversion caused by the Great Recession – or answer whether we are in a New Normal, and adjust for it.    The unadjusted data graphs out as follows:

To the eye, IP is better or worse depending on the years used for comparison.  The year over year improvement for the last three months are approximately equal.  This tends to support the methodology of the Fed which is calling IP unchanged.

If we review the MoM variation over the last 6 years, the MoM change between September and October is -0.76, while the change in September to October 2010 is better at -0.69.  If we remove the data of 2007 & 2008 due to the Great Recession, the average MoM change goes to -0.4.  Depending how you want to review the data, the MoM change is better or worse in 2010.

Overall, nothing in the data stood out pointing to an impending recession.

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