The Big Four Recession Indicators: Industrial Production Unexpectedly Falls 0.2% 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 unexpectedly fell 0.2% in May, lower than the forecasted 0.0% reading. Compared to one year ago, industrial production is up 0.6%.

Here is the overview from the Federal Reserve:

Industrial production (IP) fell 0.2 percent in May after increasing 0.1 percent in April. Manufacturing output ticked up 0.1 percent in May, driven by a gain of 4.9 percent in the index for motor vehicles and parts; the index for manufacturing excluding motor vehicles and parts fell 0.3 percent. The index for mining increased 0.1 percent, and the index for utilities decreased 2.9 percent. At 103.6 percent of its 2017 average, total IP in May was 0.6 percent above its year-earlier level. Capacity utilization moved down to 77.4 percent, a rate that is 2.2 percentage points below its long-run (1972–2024) 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