Industrial Production Considered Flat for the Last Two Months

Industrial Production (IP), the economic benchmark for approximately one-fifth of the economy – moved up slightly in November 2010 according to the adjusted data.  The IP for October was revised and now is considered negative.   Econintersect believes the data is flat for both October and November. The headlines:

Industrial production increased 0.4 percent in November after a decline of 0.2 percent in October. The rate of change for industrial production was revised down in October but up in September; the net effect of the revisions from June to October left the level of industrial production in October about the same as was previously reported. In the manufacturing sector, output advanced 0.3 percent in November with gains in both durables and nondurables. The gains among durable goods industries were particularly broad-based; only the production of motor vehicles and parts decreased substantially. Excluding motor vehicles and parts, overall factory output advanced 0.7 percent. The output of mines edged lower, but the output of utilities moved up 1.9 percent as the return of more seasonal temperatures boosted the demand for heating. At 93.9 percent of its 2007 average, total industrial production in November was 5.4 percent above its level a year earlier. The capacity utilization rate for total industry rose to 75.2 percent, a rate 5.4 percentage points below its average from 1972 to 2009.

The issue here is the seasonal adjustment factors the Fed is using.  A bar graph of the unadjusted data:

The graph tells you historically industrial production slowly declines from an August peak through November – 2005 being the notable exception.  IP this year follows the same trend.   Remember, the Fed says IP was down in October and up in November.

A simple YoY analysis tells that it is not a clear picture whether last month was down, and this month is up.  The data is too close to call.

Econintersect considers Industrial Production flat in both October and November.  There are no elements in the data which raise any flags.

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