The Big Four Economic Indicators: Industrial Production Down In December

Note: This commentary has been updated to incorporate the December data for Industrial Production.


Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which they base their decisions. This committee statement is about as close as they get to identifying their method.

There is, however, a general belief that there are four big indicators that the committee weighs heavily in their cycle identification process. They are:

  • Nonfarm Employment
  • Industrial Production
  • Real Retail Sales
  • Real Personal Income (excluding Transfer Receipts)

The Latest Indicator Data

Today's report on Industrial Production for December shows a -0.30% decrease month-over-month, which was worse than the Investing.com consensus of -0.2%. The year-over-year change is -1.01%, down from last month's YoY decrease.

Here is the overview from the Federal Reserve:

Industrial production declined 0.3 percent in December, as a decrease of 5.6 percent for utilities outweighed increases of 0.2 percent for manufacturing and 1.3 percent for mining. The drop for utilities resulted from a large decrease in demand for heating, as unseasonably warm weather in December followed unseasonably cold weather in November. For the fourth quarter as a whole, total industrial production moved down at an annual rate of 0.5 percent. At 109.4 percent of its 2012 average, total industrial production was 1.0 percent lower in December than it was a year earlier. Capacity utilization for the industrial sector fell 0.4 percentage point in December to 77.0 percent, a rate that is 2.8 percentage points below its long-run (1972–2018) average. [view full report]

The chart below shows the year-over-year percent change in Industrial Production since the series inception in 1919, the current level is lower than at the onset of 16 of the 17 recessions over this time frame of nearly a century.

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