The Big Four Recession Indicators: Industrial Production Higher Than Expected in May

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 recession indicators that the committee weighs heavily in their cycle identification process. They are:


The Latest Indicator Data: Industrial Production

Industrial production rose 0.9% in May, coming in higher than the expected 0.3% growth. Compared to one year ago, industrial production is up 0.4%.

Here is the overview from the Federal Reserve:

Industrial production rose 0.9 percent in May. Manufacturing output posted a similar gain of 0.9 percent after declining in the previous two months. The index for mining increased 0.3 percent in May, and the index for utilities advanced 1.6 percent. At 103.3 percent of its 2017 average, total industrial production in May was 0.4 percent higher than its year-earlier level. Capacity utilization moved up to 78.7 percent in May, a rate that is 0.9 percentage point below its long-run (1972–2023) 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