The Big Four Recession Indicators: Industrial Production Jumps in December

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 jumped 0.9% in December to its highest level in six months, increasing much more than the expected 0.3% growth. Compared to one year ago, industrial production is up 0.6%.

Here is the overview from the Federal Reserve:

Industrial Production (IP) increased 0.9 percent in December after moving up 0.2 percent in November. In December, gains in the output of aircraft and parts contributed 0.2 percentage point to total IP growth following the resolution of a work stoppage at a major aircraft manufacturer. Manufacturing output rose 0.6 percent after gaining 0.4 percent in November. The indexes for mining and utilities climbed 1.8 percent and 2.1 percent, respectively, in December. At 103.2 percent of its 2017 average, total IP in December was 0.5 percent above its year-earlier level. Capacity utilization stepped up to 77.6 percent, a rate that is 2.1 percentage points 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