This morning’s second big - and big negative - report was for industrial production, the King of Coincident Indicators (I call it so because historically, it more often than not marks the exact month +/-1 that a recession begins or ends).

In December industrial production declined -0.7%, and manufacturing production declined -1.3%. Even worse, both were revised down by -0.4% and -0.5% for November. Total production was lower than at any time since last February; manufacturing production was lower than at any time since October 2021:

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If production did truly peak in October, we are much closer to recession than we previously thought.

With that in mind, let’s look at the two other of the “big four” coincident indicators in addition to payrolls used by the NBER to calibrate expansions and recessions. These are real manufacturing and trade sales, and real personal income less transfer receipts:

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Both of these rebounded nicely since June with the big decline in gas prices (that has probably ended), but are still below their early 2022 peaks. I would expect these to stall or worse in the next few months, but let’s await the data.

The bottom line is that job growth is really the last coincident indicator standing at this point. When jobs roll over, the recession has begun.

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