Industrial production numbers from the Fed, chart by Mish

The Fed's Industrial Production Report for December suggests production has peaked this cycle.

Industrial production decreased 0.7 percent in December and 1.7 percent at an annual rate in the fourth quarter. In December, manufacturing output fell 1.3 percent amid widespread declines across the sector. The index for utilities jumped 3.8 percent, as cold temperatures boosted the demand for heating, while the index for mining moved down 0.9 percent. At 103.4 percent of its 2017 average, total industrial production in December was 1.6 percent above its year-earlier level. Capacity utilization dropped 0.6 percentage point in December to 78.8 percent, a rate that is 0.8 percentage point below its long-run (1972–2021) average.

A deeper dive into the details as shown in my lead chart shows weakness across the board.

Industrial Production Synopsis 

• Industrial production peaked in October
• Manufacturing peaked in April with a double top in September
• Consumer durable goods peaked in April
• Manufacturing durable goods peaked in September
• Motor vehicles and parts peaked in October

Nowhere For Years 

Industrial Production Since 1972

Industrial production has not gone anywhere since manufacturing peaked in December of 2012. 

Q&A IP and Recessions

Q: Why is IP signaling recession?
A: Because peaks in industrial production coincide with recessions.

Recession Lead Time After Industrial Production Peak

Recession lead times in months based on Fed data.

Recession lead times vs industrial production tend to be very small, typically 1-2 months. 2001 and 2020 were notable exceptions.

December Was Another Retail Sales Disaster, Even Worse With Negative Revisions

Please factor retail sales into the recession discussion. 

December Was Another Retail Sales Disaster, Even Worse With Negative Revisions

Existing Home Sales Decline 10th Month, Down Another 7.7 Percent

Also recall that Existing Home Sales Decline 10th Month, Down Another 7.7 Percent

Existing home sales fell another 7.7 percent in November. They have declined every month this year except for January.

I highly doubt we have ever seen conditions where retail sales, industrial production, and housing starts and sales have been this miserable where the economy was not already in recession.

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