The Big Four Economic Indicators: Industrial Production Up 0.6% In November, New High

Note: This commentary has been updated to incorporate the November 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 November shows a 0.6% increase month-over-month, which was worse than the Investing.com consensus of 0.3%. The year-over-year change is 3.9%, down from last month's YoY increase. Revisions were made to the previous five months.

Here is the overview from the Federal Reserve:

Industrial production rose 0.6 percent in November after moving down 0.2 percent in October; the index for October was previously reported to have edged up 0.1 percent. In November, manufacturing production was unchanged, the output of mining increased 1.7 percent, and the index for utilities gained 3.3 percent. At 109.4 percent of its 2012 average, total industrial production was 3.9 percent higher in November than it was a year earlier. Capacity utilization for the industrial sector rose 0.4 percentage point in November to 78.5 percent, a rate that is 1.3 percentage points below its long-run (1972–2017) 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 8 of the 17 recessions over this time frame of nearly a century.

Capacity Utilization

The Fed's monthly Industrial Production estimate is accompanied by another closely watched indicator, Capacity Utilization, which is the percentage of US total production capacity being used (available resources includes manufacturing, mining, and electric and gas utilities). In addition to showing cycles of economic growth and demand, Capacity Utilization also serves as a leading indicator of inflation.

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