The Big Four Economic Indicators: Industrial Production Increases for Second Straight Month

Official recession calls are the responsibility of the NBER Business Cycle Dating Committee, which is understandably vague about the specific indicators on which it bases its decisions. This committee statement is about as close as it gets to identifying its 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:


The Latest Indicator Data: Industrial Production

Industrial production increased for a second straight month in August, surpassing expectations yet again. On a monthly basis, industrial production rose 0.4%, outpacing the projected 0.1% growth. Additionally, compared to one year ago, industrial production showed an increase of 0.25%.

Here is the overview from the Federal Reserve:

Industrial production increased 0.4 percent in August, and manufacturing output inched up 0.1 percent. The August reading for manufacturing was held back by a drop of 5 percent in the output of motor vehicles and parts; factory output elsewhere rose 0.6 percent. The index for mining moved up 1.4 percent, and the index for utilities climbed 0.9 percent. At 103.5 percent of its 2017 average, total industrial production in August was 0.2 percent above its year-earlier level. Capacity utilization moved up to 79.7 percent in August, in line with its long-run (1972–2022) average. [view full report]

The chart below shows the year-over-year percentage change in industrial production since the series inception in 1919. The current level is lower than at the onset of 15 of 18 recessions over this time frame of nearly a century.

Industrial Production year over year