Industrial Production Showing No Sign of Recovery in September

Industrial Production fell slightly in September 2010. The headline from the Federal Reserve:

Industrial production decreased 0.2 percent in September after having increased 0.2 percent in August. The indexes both for manufacturing and for manufacturing excluding motor vehicles and parts also moved down 0.2 percent in September. Production at mines moved up 0.7 percent, while the output of utilities fell 1.9 percent.

For the third quarter as a whole, total industrial production rose at an annual rate of 4.8 percent after having advanced about 7 percent in both the first and second quarters of this year. The index for manufacturing decelerated sharply in the third quarter: After having jumped at an annual rate of 9.1 percent in the second quarter, factory output gained 3.6 percent in the third quarter. At 93.2 percent of its 2007 average, total industrial production in September was 5.4 percent above its year-earlier level. The capacity utilization rate for total industry edged down to 74.7 percent, a rate 4.2 percentage points above the rate from a year earlier but 5.9 percentage points below its average from 1972 to 2009.

Graph from the Federal Reserve.

Looking at the unadjusted data, there was a general weakness across most areas except mining. The Federal Reserve revised industrial production slightly upward for the last six months

The real question is whether there was a downward Industrial Production trend in September. Here, Econintersect believes the data is inconclusive. Again, because of the recession and New Normal – it is difficult to say precisely. We believe the quantitative data was better in September when compared YoY to August – however, the 2009 to 2010 improvements are becoming less good.

Overall, Econinsect believes that industrial production is flat based on the New Normal. This in itself is a damning statement as the American economy is reportedly in a “recovery”.  This recovery has capacity utilization near or below the levels seen at the worst points in past recessions, as seen in the following graph:

Graph from the Federal Reserve.

In some respects the “new normal” looks like the old recessions.

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