Two cheers for the very good industrial production report for Feburary! Total production increased 0.7%, and manufacturing production increased 0.9% to the highest level in over two years:

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But the biggest news is that the headline number wasn’t just the best since the pandemic: it was the highest number of all time since the index was first reported over 100 years ago:

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The reason total production did even better than manufacturing was all about utilities, which in January and February were 5% higher than any previous month ever:

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So why only two cheers and not three? 

Industrial production is a coincident indicator. It was the King of Coincident Indicators, but has faded in importance since the turn of the Millennium, as other sectors of the economy have become more important.

And the best leading indicator for industrial production is new orders. I track this weekly via the Regional Fed reports, which showed marked increases in the past several months, and even more significantly via the ISM manufacturing index, the most recent graph of which, showing new orders in gold, is below:

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New orders spiked in December and January to the best levels in nearly three years, but then fell back into contraction in February.

And there is a very likely reason for that: front-running tariffs. If I expect input costs to increase sharply due to the imposition of tariffs, I am going to complete as much production ahead of time as I can.

We won’t know for at least another month whether that has indeed been the case. But it is a gigantic *, and a reason for withholding the final, third, cheer.

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