The Big Four Economic Indicators: Industrial Production Up 0.7% in April

Note: This commentary has been updated to incorporate the April 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 April shows a 0.7% increase month-over-month, which was better than the Investing.com consensus of 0.5%. The year-over-year change is 3.46%, down slightly from last month's YoY increase. Annual revisions were made to the entire series incorporating new benchmark data and monthly and seasonal factor revisions. The indicator is currently at an all-time high.

Here is the overview from the Federal Reserve:

Industrial production rose 0.7 percent in April for its third consecutive monthly increase. The rates of change for industrial production for previous months were revised downward, on net; for the first quarter, output is now reported to have advanced 2.3 percent at an annual rate. After being unchanged in March, manufacturing output rose 0.5 percent in April. The indexes for mining and utilities moved up 1.1 percent and 1.9 percent, respectively. At 107.3 percent of its 2012 average, total industrial production in April was 3.5 percent higher than it was a year earlier. Capacity utilization for the industrial sector climbed 0.4 percentage point in April to 78.0 percent, a rate that is 1.8 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.

Here is a chart of the complete Capacity Utilization series, which the Fed began tracking in 1967. The linear regression assists our understanding of the long-term trend. We've highlighted the post-recession peak in November 2014.

Capacity Utilization

The latest reading is at its interim peak and climbed above the regression in late 2017.